AZRE September/October 2021 by AZ Big Media

SEPTEMBER-OCTOBER 2021

Coolest Offices for 2021

Gensler

General Contractor: 180 Degrees Architect: Gensler

INSIDE: Industrial Development p. 44 | AMA p. 48 | NAIOP p. 57

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Industrial Explosion

uring an interview for this issue of AZRE Magazine, local real estate attorney Adam Baugh commented that there’s a record level of demand for industrial development in Phoenix and a record level of investors who are putting substantial money into the space — and he couldn’t be more correct. According to new research compiled by CommercialEdge — and supported by Kidder Mathews’ Q2 Phoenix Industrial Market Report, seen on Page 7 — Phoenix leads the country in industrial development, with close to 24 million square feet of space currently under construction. To put that into perspective, the Phoenix Metropolitan area comprises slightly less than 0.4% of the U.S.’s total landmass, yet the region’s industrial development makes up 9% of the nation’s total supply. And, an additional 31 million square feet are in the planning stages! So what’s driving this growth, and can the Valley of the Sun keep up with demand? Staff writer Kyle Backer takes a deep dive into these questions with a pair of articles — “The Industrial Edge” on Page 44 and “Too much, too little or just right?” on Page 60. He examines the rapid development seen along the Loop 303 Corridor and in Mesa, and also speaks with industry experts to find out if the Valley can continue to support such immense expansion. This issue also highlights NAIOP Arizona, one of the strongest CRE organizations in the state. In a special section that begins on Page 57, NAIOP members offer their perspectives on the industrial, office and retail sectors in a roundtable discussion. And don’t miss 11 pages of member projects, ranging from massive manufacturing plants to state-of-the-art office facilities. With so many great structures under development and in the planning stages, one thing is certain: Phoenix is hot — and I’m not talking about the temperature.

President and CEO: Michael Atkinson Publisher: Amy Lindsey Vice president of operations: Audrey Webb EDITORIAL Editor in chief: Michael Gossie Senior editor: Rebecca L. Rhoades Staff Writer: Kyle Backer Interns: Jacob Flores | Gabriella Herran-Romero | Elinor Tutora Contributing writers: Carrie Kelly | Suzanne Kinney | Courtney Gilstrap LeVinus | Farrell Quinlan | Deb Sydenham ART Art director: Mike Mertes Design director: Bruce Andersen MARKETING/EVENTS Marketing and events specialist: Lynette Carrington Digital marketing specialist: Paul Schaum OFFICE Special projects manager: Sara Fregapane Database solutions manager: Amanda Bruno AZRE | ARIZONA COMMERCIAL REAL ESTATE Director of sales: Ann McSherry AZ BUSINESS MAGAZINE Senior account executives: David Harken | April Rice Advertising coordinator: Heather Barnhill AZ BUSINESS ANGELS AZ BUSINESS LEADERS Director of sales: Sheri Brown EXPERIENCE ARIZONA | PLAY BALL Director of sales: David Ealy RANKING ARIZONA Director of sales: Sheri King

Rebecca L. Rhoades Senior editor, AZRE rebecca.rhoades@azbigmedia.com

2 | September-October 2021

AZRE: Arizona Commercial Real Estate is published bi-monthly by AZ BIG Media, 3101 N. Central Ave., Suite 1070, Phoenix, Arizona 85012, (602)277-6045. The publisher accepts no responsibility for unsolicited manuscripts, photographs or artwork. Submissions will not be returned unless accompanied by a SASE. Single copy price $3.95. Bulk rates available. ©2021 by AZ BIG Media. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without permission in writing from AZ BIG Media.

CONTENTS

FEATURES 2 Editor’s Letter 6 Trendsetters 10 Executive Profile 12 After Hours 16 New to Market 18 Big Deals

22 Legislative Update

28 Stevens-Leinweber

32 Cool Offices 40 City of Tempe

44 Industrial Development

48 Arizona Multihousing Association

57 NAIOP

On the cover: Gensler

4 | September-October 2021

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TRENDSETTERS

AZRE Forum Offers Expert Insight Into CRE Industry “When the pandemic hit, we thought we were headed into another 2008-style recession, but that didn’t happen. In fact, the opposite occurred. A big difference this time is that people have money and aren’t over-leveraged.” —Kimberly Rollins, senior vice president, Commercial Properties Inc.

Real estate is booming in Arizona. But how long can it be sustained? AZRE Magazine went straight to the experts to get their take on the state of commercial real estate in Arizona. The 7th Annual AZRE Forum, which was held on August 5 at The Clayton House in Scottsdale, brought together three panels of Valley professionals who provided in-depth analysis of the industrial, office, retail and multifamily sectors; discussed the impacts of COVID-19; and forecast what could happen in the market in the future. Here are some of the highlights:

“Some parts of the market will die and change. Big box stores are going to downsize. A lot of headlines are focused on mall deterioration, but small multitenant strip malls are performing tremendously.” — Boston Chauthani, vice president, Taylor Street Advisors

“Greater Phoenix is going to become the semiconductor and electronic vehicle hub of the country, if not the world.” — Kristen Stephenson, senior vice president of research and analytics, GPEC

“Through the end of June, there were about $5.3 billion in sales. It’s reasonable to say we’ll do $11 billion to $12 billion by the end of the year.” — Cliff David, executive managing director, Marcus & Millichap’s Property Advisors division

“When the pandemic was ramping up, factories were ramping down because they thought demand was going away. As a result, prices on all materials have gone up, along with wait times. It used to take 10 to 12 weeks to get steel joists. Now it takes 10 to 12 months.” — Andrew Geier, executive vice president, Layton Construction

“We’ve been extremely busy with speculative office suites and smallersized spaces over the last 12 months, and the bigger deals are starting to come back on the market. I think we’ll return to same activity level that we were at before the pandemic by the end of next year.” — Jamie Godwin, owner and president, Stevens-Leinweber Construction

6 | September-October 2021

LEARNING BY DOING

In 2020, The School of Architecture (TSOA), formerly known as the School of Architecture at Taliesin, relocated from Taliesin West, where it was founded in 1932 as a fellowship program by Frank Lloyd Wright, to Cosanti in Paradise Valley and, about an hour north of Phoenix, Arcosanti in Mayer — both masterworks by pioneering Italian architect Paolo Soleri. Historically, as part of their thesis projects, TSOA students would erect and inhabit small dwellings in the desert surrounding Taliesin West. Following its move, the school recently unveiled the first collection of structures built on the mesa near Arcosanti. From rammed earth and rigid foam to mycelium (the root system of mushrooms) insulation and inflatable nylon, the materials used confront the realities of construction and explore the notion of “shelter.”

An Industrial Revolution The Valley’s industrial market is on fire. According to Kidder Mathews’ Q2 2021 Phoenix Industrial Market Report, record numbers were experienced across the board. Net absorption, rental rates and construction activity hit high all-time highs, and vacancies tightened to a historic low. The market is also on track to outperform 2020’s record-level performance, with strong demand for last mile and e-commerce users, as well as data centers and manufacturing.

MARKET HIGHLIGHTS Net absorption reached a market high of

5.9 million square feet 23.5 million square feet of construction is underway

Rental rates hit $0.66 per square on a triple-net basis

foot

Building a Better Workforce McCarthy Building Companies has broken ground on a new training facility that will educate those in the construction industry, as well as aspiring contractors and trades professionals. Located in a 40,000-squarefoot facility in Chandler, the multifunctional Innovation and Craft Workforce Center will be home to Builders U, McCarthy’s existing workforce training program. It will also provide hands-on training and skill development for trade partners, local schools and other industryrelated training programs, and the building will serve as a base for the firm’s prefabrication and utility-scale solar construction teams. “Arizona and the Southwest region need more skilled trade workers to support the hundreds of construction projects being built now and for the future,” says Justin Kelton, president of McCarthy’s Southwest region. “With this new best-in-class facility, we are making impactful team experience spaces a reality and taking our vision for innovation to a new level.”

TRENDSETTERS

IT TAKES AN INDUSTRY

There’s a popular catchphrase that says, “It’s not what you know, it’s who you know.” To give construction interns a leg up when it comes to making connections in the industry, Denise Allen, business development manager at AEC Solutions, coordinated an evening that brought the aspiring builders and designers together with professionals with whom they may work in the future. “You’re never too young to start building that network,” Allen points out. Engineering, architecture and general contracting interns from Willmeng Construction, SPS+ Architects and AEC Solutions, mingled with and asked questions of industry folks. “We played a little game as an ice breaker, then we split the three companies’ interns into teams, so they were mixed. By the end of the event, everyone was just sitting around and chatting,” Allen recalls. She says the feedback from the interns was positive and is planning another event in the fall.

West Valley Development Brings Economic Success Construction in the West Valley will have a significant effect on the region, according to an Economic Impact Study by the Greater Maricopa Foreign-Trade Zone (GMFTZ), which promotes and enhances economic development in the West Valley. The report summarizes the economic and fiscal impacts of the construction activity and ongoing annual operations of businesses located in the GMFTZ from 2011 to 2021, with projections to 2025. Over the 14-year period, construction will yield:

33,852 jobs $1.7 billion in wages ■ $4.8 billion in economic output ■ $319.3 million in state and local tax revenues. ■ ■

Once construction is complete and all businesses fully operational, annual day-to-day operations will yield:

14,716 jobs 733,790 in wages ■ $2.4 billion in economic output ■ $87.5 million in state and local tax revenues ■ ■

Salaries State of the Office Construction Remain Competitive

After more than a year of uncertainty, the post-COVID Phoenix office market is rebounding. Following are highlights from NAI Horizon’s Q2 Office Market Report. Health care provider offices remained at or near capacity, with restrictions in place throughout the pandemic, and mental health care services are seeing an increase in new tenants and practice expansions. Rents continue to rise. The average full-service gross rate is $27.48 per square foot, up 21 cents from the previous quarter and 56 cents from the beginning of the pandemic. Concessions, such as one year free on a seven-year contract or five months free on a five-year contract, are becoming commonplace. Landlords are also willing to invest in their properties through improvements or maintenance, and tenants are ready to ink longerterm deals. The amount of available sublease space — 4.5 million square feet — can be attributed to a handful of buildings with upwards of 100,000 available square footage.

8 | September-October 2021

Demand for construction tradespeople continues to grow. According to Build Your Future Arizona, 228,000 workers will be needed in the state by December 2024. The average yearly salary for an Arizona-based construction gig is $48,950. Following are a few jobs with average annual salaries greater than $50,000. $52,000 Drywall installer $52,291 Ironworker $52,666 Heavy equipment operator $55,328 Sprinkler fitter $58,555 Underground construction worker $61,360 Millwright $92,518 Construction manager

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EXECUTIVE PROFILE

Deep Roots Commercial developer Brian Frakes brings a love of his home state to every project By REBECCA L. RHOADES

hen noted Valley restaurateur Sam Fox announced that he will be building his first luxury hotel project, there was no doubt who would be bringing his vision to life: Brian Frakes, founder and principal of Common Bond Development Group. Together, the pair have changed the way Phoenicians play and eat, and now they hope to generate that same magic within the lodging industry. A fifth-generation Arizonan, born in Tucson and raised in Phoenix, Frakes didn’t set out to be in the commercial real estate business. He was a finance major at the University of Arizona and interned at an investment banking firm in New York City. When his then-girlfriend

10 | September-October 2021

got accepted in the medical school in Tucson, he decided to stay in Arizona and began working at Westcor Partners, which developed shopping malls. “It was an exciting time to be at Westcor because we got to work on a couple million square feet of major retail space, including SanTan Village in Gilbert and Chandler Fashion Center,” Frakes comments. Following the purchase of Westcor by The Macerich Company in 2012, Frakes and a few other executives from the business formed WDP Partners, a real estate development company. “What started out as a leasing job in the development department quickly evolved into leading major projects on Scottsdale Road and Mayo in Phoenix

and a Walmart-anchored shopping center in Queen Creek,” he says. The company also developed the Yuma Palms mall in Yuma. It was during his time at WDP that he first collaborated with Fox, who was looking for a location along the Central Phoenix Corridor for a new dining venue. “I remember taking a photo of this old Ducati motorcycle dealership from the suicide lane on North 7th Street, sending it to Sam, and him saying, ‘That’s the one,’” Frakes recalls. “We had a vision that the canopy, under which they used to park the motorcycles, was there for us. I mean, show me another spot in town that has a 10,000-square-foot canopy over an outdoor patio. Sam said, ‘What if we had games, such as shuffleboard, ping pong and bag tossing?’ That was the evolution of The Yard concept.” The success of The Yard encouraged Frakes to set out on his own and establish Common Bond. “I had always wanted to be an entrepreneur and start my own company,” he explains. “The natural progression of my career was to take the development knowledge I had acquired while working on complicated

The Global Ambassador: Sam Fox’s luxury hospitality project is set to open in 2023.

large-scale projects and applying it to that type of work with my own team.” From Safeway- and Sprouts-anchored shopping centers to restaurants and adaptive reuse projects, Frakes prefers ventures that are both pleasing to the eye and beneficial to the community in which they’re located. “When I was at Westcor and working on these large projects, such as Scottsdale Fashion Square, I saw how they weren’t just malls but instead they were places that changed the community surrounding them. They increased sales tax revenue, which allowed the cities to fund police and fire departments as well as infrastructure,” he says. “The thing that differentiates Common Bond is that we don’t just develop buildings, but we also spend a lot of time and money on the design,” Frakes continues. “We learned through the hospitality sector that the extra money you spend on design helps maximize the value of the asset and really creates a sense of place. The overall experience is more memorable than just

a great cheeseburger. But, ultimately, we want all of our projects to really stand the test of time.” Fox was one of Common Bond’s original investors. The duo has since developed additional Yard “eatertainment” projects, anchored by Fox’s Culinary Dropout restaurant, in Tempe, Scottsdale and Gilbert, as well as Tucson. “I know my skill set, and I know Sam’s skill set. When I’m connected with an operator on that level, whether it’s a grocery store, a restaurant user or a retailer, I can really engage and help them in the real estate development business. Then they can do what they’re great at in terms of operating first-class facilities,” Frakes explains. Adds Fox, “I trust Brian implicitly. We grew up learning about the business together, and I’ve seen him make genuine and fair decisions over and over again. He understands real estate, reuse of real estate and creating value where no one else sees an opportunity. He also understands what’s important to me. I’m lucky that he goes with my wild ideas.” These days, Frakes and Fox are working together again — this time bringing one of the most anticipated

projects in the Valley’s hospitality sector to a prime location in Arcadia. Part of a bigger 17-acre, $300 million mixed-use development on Camelback Road and 44th Street, adjacent to the Phoenix Suns practice facility, The Global Ambassador hotel will feature 141 luxury rooms, five original food and beverage offerings, and an 18,000-square-foot rooftop lounge, the largest in the state, with sweeping views of Camelback Mountain. “It’s going to have a major impact on the Valley,” Frakes says. “Ultimately, locals and out-of-town visitors will be able to create lasting memories. “Phoenix has changed dramatically in the last 10 years,” Frakes continues. “When I was growing up, this town was a boom-and-bust real estate camp. Now, we have a very diversified economy, and a lot of decision makers and operators are moving here from other markets and creating demand and opportunities. It’s truly fascinating what is happening, and I hope that The Global Ambassador will leave its mark and be a great legacy for me and Sam.” He adds with a chuckle, “Plus, it’s good to be next to the Suns right now while they’re on a roll.” 11

AFTER HOURS

Fancy Footwork Valley attorney Wendy Riddell finds harmony on horseback By GABRIELLA HERRAN-ROMERO

s the founding and managing partner of the legal firm Berry Riddell, which specializes in all areas of real estate, including development and construction, transactions and leasing, finance, litigation and more, Wendy Riddell is one of the Valley’s top-rated attorneys. The Phoenix native began practicing law in 1998. “I was fortunate to be hired right out of school by the firm Beus Gilbert. Ironically, my current partner, 12 | September-October 2021

John Berry, was the hiring partner there at the time,” she recalls. “Paul Gilbert, the firm’s co-founder, was very forward thinking and afforded me the flexibility to both practice law and be a new mom.” After about six years with Beus Gilbert, Riddell had the opportunity to continue practicing with Berry. “John focuses more on Scottsdale, whereas I have cases nearly everywhere else in the Valley,” she explains. “We have a very diverse practice, representing commercial and multifamily

developers, homebuilders, health providers — you name it.” But when not running a successful law firm, Riddell can be found training with her horse for dressage competitions. Riddell was introduced to dressage at a young age by her mother, who was a top athlete and competitor in the field. Dressage, derived from the French word “dresseur” for “training,” is an equestrian sport in which the horse and rider perform a series of compulsory movements and footwork that increase in difficulty as they move up the levels. Similar to figure skating, the movements are paired with sound, creating a musical freestyle. Riddell does traditional dressage, which requires an English tack and saddle, which are flatter and less ornate than their Western counterparts. As a young adult, Riddell competed professionally. She has been awarded

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AFTER HOURS

bronze, silver and gold medals from the United States Dressage Federation (USDF) and won numerous state and regional championships; she also competed in such far-flung destinations as Canada, Germany, Holland and Belgium. It wasn’t until Riddell attended Colgate University in upstate New York that she realized how important riding and competitive dressage was to her and how passionate she was about the sport. “When I went to college, my parents told me I could not have a horse. They wanted me to really experience college and said that they would be willing to talk after the first year if I got good grades. I lasted all of a week before I needed to be back on a horse,” Riddell remembers. “I had been riding horses since I was 4 years old, so all I had ever known was riding every day. By the end of that first quarter in college, I had three horses in training with me. Given the accomplishments I had achieved already, many of the amateurs in the area were happy to pay me to ride and train their horses, and to teach them. That’s when I realized this was a very necessary passion in my life.” At age 19, Riddell received a grant from the United States Equestrian Team (USEF), through which she was on schedule to be an Olympic competitor. This allowed her to train and compete for a year with her 14 | September-October 2021

personal horse at a farm just outside of Dusseldorf, Germany. However, after competing at an international level, Riddell decided that she did not want to be a full-time horse professional but instead wanted to pursue law and create a family. “I ultimately met my husband the week I returned home and started law school at Arizona State University,” she comments. Although Riddell is no longer involved in international competitions, she still engages at a local and national level with her two girls, 19-year-old Kenzie and 15-year-old Kali, who have ambitions to participate in the Young Riders and Junior Young Riders programs, which are akin to the Junior Olympics and regulated by the USDF and USEF. “Dressage is a sport that appeals to people who are very detail oriented, competitive and structured,” Riddell explains. “The amount of Olympic gold medalists who are doctors or lawyers just goes to show how it attracts that type of person. Both of my daughters have those personality traits, and I think that’s why they became so interested in riding and why they prefer competitive dressage over any other form of riding.” The equestrian sport has become not only a hobby that Riddell and her daughters are passionate about but also one of their biggest sources of bonding time.

Top left: Riddell and #hashtag. Top right: Riddell's daughters, Kenzie (left) and Kali, also ride. Here they are at a competition in Flagstaff about five years ago.

“I’m very fortunate that I get to spend so much time with my daughters doing something that we all enjoy,” Riddell notes. “A lot of times, I’m asked how I can justify such an expensive hobby, but how many parents get the opportunity to hang out all weekend with their kids, who actually want to be there with them? To me, the sport has really brought my family closer together.” In addition to fostering precious family time, competitive dressage has allowed Riddell to build skills that she uses every day in her career. “In competitive dressage, you have to have a lot of tenacity to compete with horses,” Riddell says. “You have to be willing to figure it out and make it work. Using finesse and grace, I have to convince the horse to do what I want it to do. This skill also is very much needed and applied daily as a zoning attorney.” Even with a busy work schedule, Riddell always finds the time to ride. “If there are circumstances that prevent me from riding for a few days, my husband always tells me to find a horse somehow, some way,” Riddell says. “It’s very peaceful, and it’s just a very important part of my life.”

NEW TO MARKET A

MULTIFAMILY A MOONTOWER PHX DEVELOPER: Lincoln Ventures CAPITAL PARTNER: Cross Harbor Capital Partners ARCHITECT: Shepley Bulfinch CONTRACTOR: JE Dunn INTERIOR DESIGN: Michael Hsu Office of Architecture SIZE: 24-story, 326-unit development LOCATION: 811 N. 3rd St., Phoenix START: Summer 2021

16 | September-October 2021

EDUCATION B APPLIED RESEARCH BUILDING DEVELOPER: University of Arizona CONTRACTOR AND ARCHITECT: McCarthy | SmithGroup SIZE: 89,000 square feet LOCATION: Southeast corner of East Helen Street and North Highland Avenue, Tucson COMPLETE: January 2023

MIXED-USE C THE GROVE DEVELOPER: RED Development SIZE: 15-acres LOCATION: 44th Street and Camelback Road, Phoenix VALUE: $300 million FEATURES: The Global Ambassador hotel, four-story Class-AA office building, several ground-floor retail spaces and restaurants, and more START/COMPLETE: June 2021/Fall 2023

PUBLIC D TOLLESON CIVIC CENTER DEVELOPER: City of Tolleson CONTRACTOR: Haydon Building Corp ARCHITECT: SmithGroup LOCATION: 9055 W. Van Buren St., Tolleson VALUE: $22 million START: June 2021

MULTIFAMILY E SKYE ON 6TH DEVELOPER: Hubbard Street Group CAPITAL PARTNER: Cresset Real Estate Partners ARCHITECT: Shepley Bulfinch CONTRACTOR: Clayco SIZE: 309 units LOCATION: Southeast corner of 6th Street and Garfield Street, Phoenix START/COMPLETE: July 2021/Summer 2023

INDUSTRIAL F CRAFT WORKFORCE CENTER DEVELOPER: McCarthy Building Companies ARCHITECT: DLR Group SIZE: 40,000 square feet LOCATION: Chandler START/COMPLETE: July 2021/January 2022

All according to (master) plan Why IHP Capital Partners and Värde Partners acquired balance of land in Vistancia By KYLE BACKER

orth Peoria’s Vistancia community is about to welcome new neighbors. Californiabased IHP Capital Partners and Värde Partners, with U.S. offices in Minnesota and New York, recently formed a joint venture to purchase 3,721 acres of land within Vistancia. According to the commercial real estate tracking website Vizzda, two transactions totaling $68 million include all 3,300 entitled residential dwelling units in the Northpointe neighborhood and 370 acres of commercial mixed-use development that will serve a town center. The strategic partnership, called Vistancia Development LLC, intends to

18 | September-October 2021

deliver 520 singlefamily residential lots to homebuilders later this year. “IHP Capital Partners is very bullish on our project in Vistancia but also very bullish on Greater Phoenix in general. That’s Katie Gregory why we took this large position in Peoria,” says Richard Whiteley, co-president and COO of IHP. “We’re going to be aggressive and active here for some time to come.”

THE DEAL Vistancia’s brand recognition as one of the top-selling master-planned communities in Greater Phoenix made it enticing for investors, especially since the development still has room to grow in both residential and mixed-use areas. For Whiteley, investing in a mature master-planned operation meant that some financial risks were diminished.

Mark Hammons

Richard Whiteley

“People have already voted on Vistancia — 17,000 residents live there. The thing about buying into these midcycle master plans is we already have some comfort that the investment thesis has been proven. The deal is somewhat de-risked by the fact that the southern half of the master plan has been so successfully received,” Whiteley says, adding that nothing is a sure bet, especially in real estate. The collaboration between IHP and Värde Partners also lowered the exposure of both firms. “We want to de-risk investments for us. Our

partnership with Väde Partners allows two preeminent firms in residential real estate to come together and split a project,” Whiteley remarks. The northwest Valley where Vistancia is located is easily accessible thanks to the Loop 303, which connects the region with the rest of Greater Phoenix. Just 15 minutes east of Vistancia, Taiwan Semiconductor Manufacturing Company (TSMC) has started construction on a $12 billion chip plant that will attract workers and further investment. This will add to the workforce already present in the northwest Valley, making the area a robust employment corridor. “What we like about Peoria is that it’s an area that’s going to grow through the knock-on effects of what’s going on with manufacturing to the southwest in Glendale and with TSMC to the east. All the network effects that come with investments of that size means that the northwest area of Loop 303 is going to fill in,” Whiteley comments. The Loop 303 is a boon to Vistancia and the Northwest Valley, according to Katie Gregory, deputy city manager of Peoria. “Having the Loop 303 come through opened up the opportunity for Vistancia’s commercial core to be more than what I call neighborhood commercial. It has greater regional potential because of the infrastructure

and ease of access,” she says. “Other communities such as Lake Pleasant Heights are coming in with about 4,000 units. And then north of Vistancia will be Saddleback Heights, which has another 8,000 units planned with some commercial nodes all the way up to Carefree Highway.” Another factor making the decision to invest in Vistancia easier was the support from the City of Peoria. “Our CEO, Doug Neff, met with Peoria’s city council. Part of our due diligence was trying to understand the thinking toward the project, because you don’t want to make an investment of this size and not comprehend the political climate,” Whiteley explains. “We got very comfortable very quickly. The council members are smart and engaged. We’re working with them closely to ensure that we all like what happens in the town center and, of course, in Northpointe.”

NORTHPOINTE Mark Hammons, principal at Land Resources (LRI), has history with Vistancia. When the community was first breaking ground, he was the senior vice president at Sunbelt Holdings, which formed a joint venture with J.F. Shea for the project. Hammons was named general manager for the

partnership and continues that work today under the LRI flag. Land Resources helped IHP and Värde Partners get comfortable with the asset and the acquisition by providing data collected from managing the day-to-day operations. “We know what things cost and what they sell for, and we manage the marketing of the entire master plan,” Hammons explains. Located at the northern end of Vistancia between the White Peak and Twin Buttes landforms, Northpointe sits at a slightly higher elevation than the other neighborhoods within the development. This topography offers residents commanding views of the desert scenery. According to Whiteley, Downtown Phoenix is visible from certain lots on a clear day. “Now, this is not going to be a customhome community. Our pro forma has houses that range from 1,700 square feet to 2,900 square feet and are priced between $350,000 to $520,000. We'll be offering homes with views in the $450,000 to $500,000 range, which I think means that we’re going to be in great shape to sell through quickly,” Whiteley continues. The nearby town center will be situated on the 370 acres of commercial mixed-use development. Plans for the area include restaurants, retail, apartments, and industrial and office space. “There’s going to be the city center type of development that needs to be there to support nearby residents. But then there’s also going to be plenty of space for us to have advanced manufacturing, supply chain for TSMC, corporate headquarters — whatever we can draw to the area that makes sense,” explains Gregory. “This isn’t going to be built out in the next five years. It’ll probably be more along the lines of the next 20 to 30 years.” Hammons concludes, “A project like Vistancia needs a team like IHP and Värde Partners to keep the vision of the master plan. They believe in the market. As a development management company, LRI feels that Vistancia is in very good hands, especially for its last stages of the master plan. It's a community that’s going to continue to evolve over time and is set up to succeed very well right now.” 19

MULTIFAMILY/SALES

$159M |

TRADITION AT KIERLAND 6633 E. Greenway Parkway, Scottsdale BUYER: First Pointe Management Group/Ezralow Group SELLER: Bascom Group LENDER: LoanCore Capital

$153.5M | LEGEND AT KIERLAND APARTMENTS

6735 E. Greenway Parkway, Phoenix BUYER: First Pointe Management Group/Ezralow Group SELLER: Bascom Group LENDER: LoanCore Capital

$150.5M |

THE DISTRICT AT SCOTTSDALE 15446 N. Greenway Hayden Loop, Scottsdale BUYER: Kohlberg Kravis Roberts & Co. SELLER: F & B Capital and Bluerock Real Estate

$130M |

THE SCOTTSDALE GRAND 15501 N. Dial Boulevard, Scottsdale BUYER: Oxford Properties Group SELLER: Kaplan Companies

$125M |

PARCLAND CROSSING 800 W. Willis Road, Chandler BUYER: Sunroad Enterprises SELLER: Private Portfolio Group

INDUSTRIAL/SALES

$103.2M | 901,700 SF

LINCOLN LOGISTICS CENTER 40 575 S. 143rd Ave., Goodyear BUYER: American Realty Advisors SELLER: Nike Inc.

$56M | 450,619 SF

2250 S. LITCHFIELD RD. Northwest corner of Litchfield Road and MC 85, Goodyear BUYER: CIM Group SELLER: Opus Development BROKER: Cushman & Wakefield

$25.4M | 153,517 SF

725 N. 73RD AVE. Northeast corner of 75th Avenue and Van Buren Street, Phoenix BUYER: Kohlberg Kravis Roberts & Co. SELLER: Baron Properties / Mountain West Industrial Properties

20 | September-October 2021

$22M | 44,244 SF

2601 W. BROADWAY RD. Southeast corner of 48th Street and Broadway Road BUYER: Mapletree Investments SELLER: Sila Realty Trust

$19.1M | 104,273 SF

CHANDLER BUSINESS CENTER 6150 W. Chandler Boulevard, Chandler BUYER: Scanland Temper Bard and Patrick Terrel SELLER: Fullerton Properties

Editor’s note: Here are the biggest deals in Arizona commercial real estate from July 1, 2021, through Aug. 31, 2021, according to data collected by the commercial real estate tracking website Vizzda.

OFFICE/SALES

$56.5M | 181,440 SF CASA

7878 N. 16th St., Phoenix BUYER: GLL Real Estate Partners SELLER: George Oliver

$39M | 226,449 SF

GAINEY RANCH CORPORATE CENTER — 8877 BUILDING 8877 N. Gainey Center Drive, Scottsdale BUYER: Dansons SELLER: Nationwide Realty Investors SELLER BROKERS: Lee & Associates BUYER BROKERS: Cushman & Wakefield

$30.2M | 206,199 SF PERIMETER PARKVIEW CORPORATE

CENTER 8377 E. Hartford Drive, Scottsdale BUYER: Stephen and Lawrence Cushman SELLER: Kristen Parrish and Britney Camacho

$24.6M | 199,677 SF

AIRPORT TECHNOLOGY CENTER 4127 and 4129 E. Van Buren St., Phoenix BUYER: TerraCap SELLER: Lone Star Funds

$14.9M | 11,129 SF DIGNITY HEALTH — ST. JOSEPH’S

HOSPITAL AND MEDICAL CENTER 4975 N. Dysart Road, Litchfield Park BUYER: Wolfsen Land & Cattle SELLER: Synergis Development Partners

LAND/SALES

$125M | 5,458 AC FORMER CHRYSLER PROVING GROUNDS

Northeast corner of 211th Avenue and Dove Valley Road, Wittmann BUYER: An entity managed by Greenberg Traurig SELLER: iStar

$123.2M | 388.95 AC

EASTMARK LAND Northeast corner of Ellsworth and Warner roads, Mesa BUYER: Redale LLC SELLER: DMB Associates Inc.

$40.1M | 168.51 AC

AIRPARK LOGISTICS CENTER (PROPOSED) Southeast corner of Estrella Parkway and Yuma Road, Goodyear BUYER: LGE Design Build SELLER: SunChase Holdings BROKER: Land Advisors

$32.9M | 82.19 AC

SWC 107TH AVENUE AND I-10 Avondale BUYER: Ashley Furniture Industries SELLER: Ergas Group

$23.6M | 148 AC

SEC 99TH AVENUE AND BUCKEYE ROAD Estrella Village BUYER: George Oliver SELLER: John E. Garretson

LEGISLATIVE UPDATE

Bipartisan Agreement Invests in our Country and Its People

n July, a group of Senate Democrats and Republicans, including Arizona Sen. Kyrsten Sinema, released details of the Bipartisan Infrastructure Deal. This agreement passed the Senate in early August and was sent back to the House of Representatives for consideration and markup. The legislation includes $550 billion in infrastructure investments paid largely by unused COVID relief funds already appropriated by Congress. A White House synopsis of the bipartisan agreement includes the following breakdown of how the funds will be allocated:

ROADS, BRIDGES AND MAJOR PROJECTS: $110 BILLION This investment funds the aging infrastructure needs of roads and bridges throughout the U.S. The bill allocates $16 billion for major projects that are too large or complex for traditional funding programs but will deliver significant economic benefits to communities. It also reauthorizes the Surface Transportation Reauthorization Act for an additional five years.

PASSENGER AND FREIGHT RAIL: $66 BILLION The infrastructure deal funds the U.S. rail network that carries more than 1.8 billion tons of freight valued at more than $830 billion annually, as well as 32.5 millionplus passengers on rail passenger transportation services. Operating assistance and new construction grants are also included.

BROADBAND INFRASTRUCTURE: $65 BILLION An estimated 19 million Americans lack access to high-speed internet. From urban broadband deserts to much needed rural connectivity, this investment will no doubt help bridge the digital divide throughout Arizona. 22 | September-October 2021

AIRPORTS: $25 BILLION The legislation allocates $20 billion in funding for air and terminal projects and $5 billion for air traffic control facilities in airports throughout the U.S.

ENVIRONMENTAL REMEDIATION: $21 BILLION

Carrie Kelly

The deal addresses legacy pollution and allocates funds to clean up superfund and brownfield sites. It also backs reclaiming abandoned mine land and capping orphaned gas wells, actions that will benefit Arizona.

AAED

PORTS AND WATERWAYS: $17.4 BILLION

POWER AND GRID: $65 BILLION

This bill invests in port and water infrastructure. Funding for the Army Corps of Engineers and Coast Guard also is included.

Part of the deal supports grid reliability and resiliency infrastructure. It includes funds for critical minerals and supply chains for clean energy technology, carbon capture, hydrogen, direct air capture and energy efficiency technologies.

WATER INFRASTRUCTURE: $55 BILLION The deal provides funding for water projects, lead service line replacement and water infrastructure in tribal communities.

RESILIENCY: $50 BILLION In an effort to make our communities safer and our infrastructure more resilient to the impacts of climate change and cyberattacks, the bill funds cybersecurity protection of critical infrastructure needs, flood mitigation, wildfire, drought, coastal resiliency, waste management, ecosystem restoration and weatherization.

PUBLIC TRANSIT: $39.15 BILLION The largest Federal investment in public transit in history provides significant funding for bus, streetcar and rail transit systems in both rural and urban areas of the country. It also extends the Fixing America’s Surface Transportation (FAST) Act for an additional five years.

SAFETY AND RESEARCH: $10.5 BILLION The deal invests additional money on grant programs, such as Safe Streets for All, Vision Zero and the Strengthening Mobility and Revolutionizing Transportation (SMART) Grant Program, as well as utility upgrades.

ELECTRIC VEHICLE (EV) INFRASTRUCTURE: $7.5 BILLION As our nation’s first national investment in EV infrastructure, the deal supports alternative-fuel corridors and a national network of EV charging stations to facilitate long-distance travel. The funding will be focus on rural disadvantaged communities. The Arizona Association for Economic Development (AAED) continues to advocate for infrastructure investments. From broadband and rural highways to water and urban transportation, infrastructure is necessary for the efficient movement of goods and services as a function of economic advancement in Arizona. Carrie Kelly is the executive director of the Arizona Association for Economic Development.

AMA Legislative Priorities Become Law

rizona lawmakers wrapped up the third-longest legislative session in state history on June 30. The 171-day session was just shy of the 173-day record set in 1988 — making it one for the books. While 1,774 bills and 125 memorial resolutions were introduced in the 2021 legislative session, the following issues remained at the forefront of the AMA’s advocacy efforts.

AFFORDABLE HOUSING After falling short last year due to the outbreak of COVID-19, the Legislature finally passed a state Low-Income Housing Tax Credit (LIHTC) program. Arizona’s new LIHTC program models itself after the federal public-private program signed into law by President Ronald Reagan as part of his Tax Reform Act of 1986. Federal LIHTC has helped finance approximately 47,000 affordable housing units — nearly 99% of the units in Arizona — since 1987. While that number sounds significant, the reality is that we need many more units to simply meet demand. In fact, to meet immediate needs, Arizona should be building nearly 3,000 new affordable units annually; we are currently building at half that pace. The final state LIHTC proposal, introduced by Rep. Regina Cobb and Sen. David Gowan resulted in the creation of a $4 million annual tax credit. This relatively small investment by the state will, almost immediately, make a major dent in our lagging supply of affordable housing. Arizona now joins nearly 20 states in offering a state LIHTC program. The

AMA worked closely with the Arizona Housing Coalition in passing this historic piece of legislation.

new remedies for property owners to quickly remove an animal from the rental unit — in the event the renter passes away — and release the animal to a family member or shelter. Prior to the law change, animals were treated no differently than any other personal item held by the renter, putting property owners in a precarious position of having to choose between providing care to the animal or simply locking the door and waiting for the hold period, prescribed by statute, to expire. This was a similar issue rectified by the AMA in a 2018 state law change that dealt with animals left behind when a renter abandoned the unit.

VIRTUAL COURT

RENT REGULATION

Courtney Gilstrap LeVinus AMA

In a move to make a temporary COVID policy permanent, the AMA worked with Sen. Warren Petersen in passing SB 1322, which will allow any party, including an attorney or witness, to appear telephonically or virtually for an eviction action proceeding before the court. While many courts were indicating that they were likely moving in this direction without the law change, placing the requirements in statute ensures that the policy will be uniformly applied to all courts across the state and that individual courts will not create their own specific rule or requirement.

ANIMALS IN RENTAL UNITS The AMA worked closely with Rep. Shawnna Bolick in passing legislation to expediate the release of a deceased or incapacitated tenant’s animal. House Bill 2507 provides

The 2021 legislative session also saw an unprecedented number of bills introduced that directly attack the rental housing industry. Eighteen bills attempted to impose some form of new regulation on rental owners. Of the those, five proposed pieces of legislation, if passed, would impose some form of rent control on the industry. Rent control policies, which are found in some communities across the country, would have a catastrophic impact on housing development. Our country has very few examples, if any, of comparable price controls since these types of policies are universally rejected by economists and business leaders. Fortunately, none of these harmful bills made it across the finish line in 2021. Courtney Gilstrap LeVinus is the executive director of the Arizona Multihousing Association. 23

LEGISLATIVE UPDATE

Arizona Legislature wraps with historic tax reform and other CRE protections

fter 171 days in session, the Arizona Legislature adjourned on June 30. While many hotbutton issues — such as election reform proposals, education funding ideas and pandemic-related policies — received the bulk of media attention, a historic tax reform package will likely go down as the single most important policy shift for the state in the past decade. For BOMA Greater Phoenix, which represents some of the largest commercial office building owners and property managers in the state, this reform package took front and center for our advocacy efforts. For years, the potential growth of commercial real estate (CRE) has been hindered due to relatively high commercial property taxes. Prior to this year’s reform, Arizona had some of the highest commercial property tax rates in the country. Regionally, Arizona compared negatively with New Mexico, Nevada and Utah — and even worse with Texas, which simply rolls out the red carpet with generous incentives to draw job creators from California. Property tax in Arizona is assessed and administered in each county by the county assessor. The state assigns legal classes to categorize property based on its use, and an assessment ratio is applied to the value. Prior to this year’s reform, Class 1 property, which includes commercial, industrial, utilities and mines, was assigned the highest rate of all nine classifications at 18%. To achieve parity for commercial real estate, Sen. J.D. Mesnard and House Majority Leader Ben Toma secured majority consensus around lowering the assessment ratio from 18% to 16% over four years, with a 0.5% reduction each year. 24 | September-October 2021

However, their rate will be capped at 4.5%, much lower than the current 8% rate. If revenues continue to meet projections, then further consolidations of the tax brackets will be triggered, ultimately leading to a flat 2.5% rate for all filers except those in the top (4.5%) bracket. To appease concerns from local jurisdictions about a potential loss in revenue from the cuts, the legislature wisely employed the use of revenue triggers and increased the percentage of state-shared revenue to be distributed to the localities.

LIABILITY PROTECTIONS KEY FOR POST-PANDEMIC RECOVERY Farrell Quinlan BOMA

MOVING ARIZONA TO A FLAT TAX Property tax wasn’t the only area the legislature addressed this year, as lawmakers also took aim at Arizona’s income tax system. While lawmakers have long promoted the idea of moving Arizona to a “flat tax” model, the recent passage of Proposition 208 — the measure that created a surcharge to increase income taxes for the purposes of providing more education funding — only heightened the urgency for change. Much like the state’s commercial property taxes, Arizona’s income taxes catapulted to among the top in the country, due to the Proposition 208 surcharge — second only to California in the region. Under the Mesnard/Toma plan, the state’s individual income tax rates were reduced, and the individual brackets were consolidated. Effective January 1, 2022, the state’s four individual income tax rates will be consolidated into two by eliminating the 4.5% and 4.17% general rates. The two lower rates will be reduced from 3.34% to 2.98% and from 2.59% to 2.55%. Top earners (single filers earning $250,000 and married filing jointly earning $500,000) will still pay the Proposition 208 surcharge.

BOMA Greater Phoenix also applauds Sen. Vince Leach’s efforts to pass SB 1377, which creates business liability protections during the COVID-19 pandemic. The bill, retroactive to March 11, 2020, holds a person or “provider” harmless for damages in a civil action for any injury, death or loss to person or property based on a claim that the defendant failed to protect the person or public from the effects of the pandemic unless “it is proven by clear and convincing evidence that the person or provider failed to act or acted with willful misconduct or gross negligence.” These liability protections are critical for CRE operators as concern was growing over a potential rash of lawsuits from “mass action” filers, akin to the frivolous Americans with Disabilities Act complaints that swept through the Valley several years ago and ultimately required intervention from our state attorney general and the legislature to put an end to the abuse. The 2021 Legislative session will certainly go down in the history books as one of the most important sessions for CRE and business owners. We look forward to the 2022 session to further advance policy that encourages investment in Arizona’s CRE. Farrell Quinlin is the executive director of the Greater Phoenix chapter of the Building Owners and Managers Association (BOMA).

Raising taxes will slow development of projects needed for recovery C ommercial real estate development is a high-risk venture, led by entrepreneurs driving economic growth in our communities. Office buildings, shopping centers, apartments, hotels, manufacturing facilities and fulfillment/distribution centers are examples of real estate developments that require significant, high-risk investment. These projects provide jobs, create affordable housing and meet other needs for Arizonans. While the COVID-19 pandemic challenged nearly every commercial real estate sector in 2020 and 2021, a new report by Newmark Research, titled “The Newmark Opportunity Index,” ranks Phoenix among the hottest cities for new opportunities in the multifamily housing and hospitality sectors. Over the next few years, buildings in Arizona will need to be repurposed and reimagined to adapt to the post-COVID era. As the Valley continues its pandemic recovery and attracts new residents from across the country, it’s important to promote policies that will mobilize and encourage real estate investment, not create unnecessary barriers. On the heels of a successful state legislative session that lowered commercial property taxes and income taxes, NAIOP is turning its attention to federal policy proposals that would reduce investment in innovative businesses and real estate projects throughout the state. President Joe Biden has committed to helping small businesses “Build Back Better” through grants, investments and an infrastructure package. Sen. Kyrsten Sinema has been a leader in finding bipartisan compromise on a major infrastructure package that would

Suzanne Kinney NAIOP

fund critical highway, water and port of entry projects. However, other members of Congress have introduced legislation that would substantially raise taxes on entrepreneurs and investors. Several of these proposals would directly hit commercial real estate by raising the capital gains tax rates, eliminating 1031 like-kind exchanges and taxing carried interest at the higher, ordinary income rate. Many real estate projects are developed by small partnerships that rely on a combination of loans, private investment and business expertise, or “sweat equity.” For context, these projects frequently cost tens of millions of dollars to complete — an insurmountable amount of cash for most developers and entrepreneurs to have on hand. These projects typically are funded by investment partnerships between a general partner, who does most of the work, and limited partners, who provide most of the funding. Carried interest, often referred to in real estate as “the promoted return,” is the portion of the profits that the general partner realizes for his or her investment of time and money when a project is successful.

This is not compensation for routine work, such as leasing or property management, but rather investment income for the person who provided sweat equity along with expertise, business acumen and hard work. Raising taxes on individuals and small businesses who contribute funds or sweat equity to a project will diminish the incentive to take on risk. This will make it more difficult to attract companies that will create new jobs or investors who are interested in developing affordable housing. It will also make it harder to increase warehousing capacity for businesses that want to to avoid product shortages, similar to those experienced during the initial months of the COVID-19 pandemic. Another concerning proposal would eliminate Section 1031 of the Internal Revenue Code for like-kind exchanges greater than $500,000. Since 1921, Section 1031 has allowed investors to defer paying capital gains taxes on investment property sales by reinvesting the proceeds into a similar investment property within a specified time frame. Reinvestment of capital gains can help businesses continue to grow. Current legislative proposals would require the taxpayer to recognize gains from the sale of real property in the same tax year they transfer the property. These restrictions would stifle transactions, provide a disincentive to upgrade assets and hamper the marketplace. After a year like 2020, this is certainly not the time to discourage long-term investment in Arizona or anywhere throughout the nation. While we look to lawmakers in Washington, D.C., to pass a reasonable bipartisan infrastructure package, we strongly encourage Arizona’s congressional delegation to reject any proposal that could harm local entrepreneurial innovation, risk taking and sweat equity. This is the time to put our communities and job creators first. Suzanne Kinney is the president and CEO of Arizona Chapter of NAIOP, the Commercial Real Estate Development Association. 25

LEGISLATIVE UPDATE

Deb Sydenham ULI

Housing For All H

ousing affordability and the creation of thriving mixedincome communities should not be an aspirational goal for Arizona and the Phoenix Metropolitan area. It should be a mandate. Metro Phoenix used to be one of the most affordable regions in the country, but rising land costs, supply shortages and stagnate wages have all contributed to a “perfect storm” that is decreasing housing affordability. Most metropolitan centers in Arizona, including Flagstaff, Tucson and Prescott, are all experiencing this affordability crisis. Making effective and successful change is easier said than done. Communities across the region are drilling down on specific policies and regulations, working collaboratively with the private sector and nonprofits to craft frameworks that encourage the development of affordable and workforce housing and address homelessness. It’s not necessary to reinvent the wheel. Strong examples of success can be found across the country, and each year, the Urban Land Institute’s Terwilliger Center for Housing highlights the efforts of leaders throughout the U.S. who are working to expand housing opportunities. In fact, this year there are 16 finalists in the Jack

26 | September-October 2021

Kemp Excellence in Affordable and Workforce Housing Awards, which recognizes exemplary developments that meet workforce and affordable housing needs and help create mixedincome communities of opportunity. In January 2021, the Urban Land Institute Arizona District Council (ULI), in partnership with Vitalyst Health Foundation and with support from the Robert Wood Johnson Foundation, released “Advancing Health & Equity Through Workforce Housing.” This report was the culmination of an 18-month effort by the Housing, Health & Equity Task Force and created a compilation of strategies, tools and examples covering a range of potential solutions for increasing healthy and equitable affordable workforce housing in the Phoenix Metro region. Without intentional efforts, renters and low- and moderate- income working families will continue to be priced out of markets and forced to move outward from jobs and community culture. Homelessness will continue to climb as individuals and families struggle under the burden of housing costs. We at ULI firmly believe that sustaining a full spectrum of housing opportunities is a fundamental underpinning of healthy and thriving communities. Through the work of its task force, ULI sought to answer a driving question that is in many local discussions around housing affordability: Are market solutions available for workforce housing that are feasible and scalable, especially in transit-accessible neighborhoods with equitable and health-promoting opportunities? The simple answer is, “Yes, solutions do exist.” However, none are a silver

bullet approach. Implementation will require a suite of innovative tools and strategies, policy modifications and cross-sector partnerships, along with passion and commitment. Solutions to addressing housing affordability can be organized around six key themes: • Inclusive community investment without displacement • Planning and regulations • Land and location • Finance and capital • Sustainable, healthy design • Partnerships A number of efforts that zero in on housing affordability and homelessness across the region continue. These include the City of Tempe’s Housing Plan, City of Phoenix Affordable Housing Initiative, the recent creation of the Low-Income Housing Tax Credit program, Housing Trust Fund Restoration, Arizona Housing Fund, Greater Phoenix Leadership, Arizona Community Foundation PreDevelopment Loan Fund, Maricopa Association of Governments Regional Homelessness Forum on Housing and many others. Additionally, the Federal Reserve Bank of San Francisco recently released cutting-edge essays in the fifth volume of its “What Works” series. The Urban Land Institute America’s Terwilliger Center for Housing contributed a piece focusing on the developer’s perspective to building mixedincome communities and how these projects create and sustain a sense of fellowship. For developers, building mixed-income communities is a worthy goal but one that raises obstacles as they seek to satisfy the different and sometimes competing needs of various stakeholders, including investors, local government leaders and residents. The bottom line? Every person needs housing that is affordable to them. Working together, we can ignite possibilities — the answers are within reach. Deb Sydenham, FAICP, is the executive director of Urban Land Institute Arizona District Council. This Legislative Update includes excerpts from the “Advancing Health & Equity Through Workforce Housing” report, ULI Arizona, 2021.

CELEBRATING FORTY YEARS of hard work, handshakes, projects and partnerships representing the best in Phoenix TI and ground-up construction.

602.485.1950

STEVENSLEINWEBER.COM

STEVENS-LEINWEBER

Strong leadership: Jamie Godwin (left) and Erik Powell

YEARS OF CONSTRUCTION EXCELLENCE

Stevens-Leinweber marks anniversary by recommitting to quality and service

reating a successful corporate culture can be elusive. For Phoenix-based StevensLeinweber Construction (SLC), its values are not only the cornerstone of four decades of growth, they are the catalyst that continues to push the general contractor forward, allowing it to expand into new local market sectors, maintain enviable industry relationships and attract generations of family members. “Our company is built on 40 years of promises made and promises kept,” says Jamie Godwin, president,

28 | September-October 2021

CEO and owner of SLC. “When you operate this way, there are endless opportunities to modernize and improve, but the basic approach doesn’t change. Our anniversary tagline is, ‘Hard Work, Handshakes, Projects and Partnerships.’ That is truly the foundation of who we are, how we’ve risen to success and how we’ll continue to succeed.” Godwin joined SLC in 2014 with an understanding that he would acquire the business through a multiyear purchase agreement. In 2017, he executed the company’s launch

beyond its tenant improvement (TI) roots to include ground-up office and industrial construction. In the years since, SLC has added more than 4 million square feet of Class A ground-up development to its existing Arizona portfolio of more than 8,500 completed TI jobs. It has millions of additional square feet of ground-up construction in the pipeline and a solid book of tenant improvement work that extends into 2022 and beyond. “It’s a story of, ‘Good things happen to good people,’” says Mark Leinweber, one

of the company’s founders. “When you approach business with good intentions, you get good outcomes in return.”

PROUD BEGINNINGS Stevens-Leinweber was formed in 1981 by Leinweber and Mike Stevens. At the time, the pair were coworkers at a private development company that was struggling from an economic downturn. Unsure if their employer could weather the headwinds, Stevens and Leinweber decided to strike out on their own. Their first job was a TI assignment from their previous employer. It put their fledgling company on a path of work that would quickly become its bread-and-butter. “I never dreamed I would end up being a tenant improvement contractor, but the door was there and we walked into what became a specialty construction service in the Valley,” Leinweber recalls. “We worked hard for what we earned, but it was also being in the right place at the right time.” At the time, general contractors who specialized in TIs were nonexistent, though this type of work became more common for architects and builders during the 1980s. “We assumed that one day we would move into ground-up construction, but after a few years of doing TIs and refining our approach and systems, we started getting really good at it,” Stevens says. “We became one of the very first general contractors in

Boeing XPO

Phoenix who specialized in tenant work and an industry leader in this niche.” About eight years into the business, SLC was offered an 80,000-squarefoot job for Catholic Healthcare West, now known as Dignity Health. “That was a challenging job that a couple of our competitors turned down, but we completed it successfully, and it demonstrated our ability to deliver large projects,” Stevens comments. “We still have Dignity Health as a regular client. That means a lot to us.” Stevens and Leinweber built SLC with an emphasis on honesty and integrity — principles that remain the foundation of the company to this day. “When it came to their daily work, Mike and Mark solved problems person-to-person and made their word their bond,” Godwin says. “In a world full of changes and challenges, building mutual trust with employees, subcontractors and vendors allowed them to keep their projects on track and on target for completion. It is the same philosophy we apply today, with the same level of success.”

CHANGING OF THE GUARD After decades leading the business, Stevens and Leinweber began contemplating how they were going to exit the company, hoping to find someone with their same level of integrity, skill and work ethic to lead SLC into the future. They met Godwin through a series of project assignments and were impressed.

Mike Stevens Executive vice president / founder

Mark Leinweber Founder / retired

After the jobs were completed, they approached him with an offer to come on board and eventually take over management and ownership. “Jamie was the only person I knew who was capable of maintaining our company with the standards and philosophy we worked more than 35 years to create. It was a seamless transition,” Leinweber notes. “When I retired and left the company, nobody missed me. That’s what I call a successful succession plan.” Godwin also possessed the market knowledge needed to run a firm like SLC. He worked in, and eventually led, the design-build division of Opus West’s Phoenix office for almost 13 years before the Great Recession of 2008 hit. He was also the co-founder and co-owner for five years of RSG Builders before being tapped to join SLC.

Eide Bailly

STEVENS-LEINWEBER Georgia Pacific

“The decision to leave RSG for this new opportunity was a considerable one but, in the end, I chose the offer from Mike and Mark,” Godwin says. “The opportunity to lead and grow such a stellar, established company was just too good to pass up.” Godwin has been the sole owner of SLC since 2018.

THE NEXT CHAPTER With Godwin at the helm, SLC has evolved into a full-service general contractor that provides both ground-up and tenant improvement services. A significant milestone in that evolution was the addition of Erik Powell, now vice president at SLC, who was brought on board to launch the company’s ground-up division. Powell believes that SLC’s strong foundation contributes to its continued success. “As a company, we were fortunate to hit the market at the right time,” Powell says. “Arizona’s industrial sector is booming, and it has grown our industrial ground-up activity faster than anyone could have expected.” The biggest challenge, Powell says, has been adapting to a rapidly evolving local economy. “We’re currently running more than 3 million square feet of new construction at any given time,” he explains. “But we have the 30 | September-October 2021

Zovio

right teams in place, and we give them the freedom to succeed from project management to field supervisors to our subcontractors.” Godwin adds that, in 2021, revenues from Powell’s division will surpass that of the TI wing of the company for the first time. “It’s an indicator that our corporate philosophy works across the board, whether for

SLC BY THE NUMBERS

40 YEARS IN BUSINESS 8,500+ PROJECTS COMPLETED

60+ EMPLOYEES tenant improvement or ground-up construction,” he says. “Both specialties have now become part of our story, and we continue to grow in the volume and level of sophistication that we deliver on both fronts.”

DEDICATION TO QUALITY As was the case for so many other businesses, the disruptions caused

by COVID-19 encouraged Godwin to evaluate the present state of his company and more carefully consider his growth plan for the coming years. This analysis culminated in a threeyear vision document that defined the ‘SLC Experience’ and outlined how the firm will bring that experience to life. Leading the list was a pledge to continue SLC’s corporate culture, in which personal and professional employee growth is supported and hard work is rewarded. For clients, the SLC Experience involves white-glove treatment that culminates in tangible value. For subcontractors, it’s a promise to provide the highest level of safety, profitability and job experience. For the community, it’s a call to serve and give faithfully through acts of philanthropy that improve the lives of those in need. With these commitments always top of mind, Godwin feels bullish about the years ahead. “We’ve successfully navigated a pandemic, and we operate in what is now the nation’s fastest growing city,” he says. “This is absolutely the place to be as the market recovers.” Godwin adds, “We don’t need SLC to be the biggest, but we do want to be the best at everything we do. That’s something that lies deep within our DNA, and we’ll continue to apply that standard in this exceptional market.”

QUESTIONS WITH JAMIE GODWIN

President and CEO Jamie Godwin joined Stevens-Leinweber Construction (SLC) in 2014 and has been the sole owner since 2018. Q: What are you most proud of about SLC? A: I’m particularly proud of our diversification over the last five years so that we not only provide tenant improvement services but also ground-up construction. We’ve done this while maintaining the same approach and same culture of hard work and mutual respect that has been the hallmark of Stevens-Leinweber during its 40-year history. Q: What are SLC’s greatest strengths? Its greatest opportunities for growth? A: Our greatest asset is our people. We depend on them every day, and they rise to the occasion. Our greatest opportunity for growth lies in market sectors that are complimentary to those areas in which we are

Opendoor

already active. Hospitality and medical are part of our strategic planning. Q: What is a surprising fact about SLC? A: Our entire executive leadership group is made up of individuals who have real estate development experience, so we understand what is important to our developer/ owner clients. Q: What advice would you give to young people about starting a construction career? A: Do it. This is an extremely rewarding profession that creates environments in which people spend a significant amount of their time. What we do is very impactful to a lot of people.

Chandler Corporate Center

COOL OFFICES

Inspiring Design 15 fabulous workspaces prove that the office continues to thrive

ighteen months after many workers were sent home to help prevent the spread of COVID-19, companies are welcoming people back to the office. Many businesses have learned that their employees can work from just about anywhere, so their office spaces need to be more than just functional. Dull, drab cubicles are being replaced by bright and airy glass-enclosed collaborative work zones, cheery gathering areas, games rooms and tranquil outdoor spaces — inspiring surroundings that will positively affect staffers productivity and happiness. Each year, AZRE Magazine shines a spotlight on office environments that are as attractive as they are functional. From expansive multifloor new builds that will accommodate thousands of employees to reimagined postmodern contemporary masterworks, the 15 “Cool Offices” showcased on the following pages are achievements in design, technology and sustainability.

850 PBC

Owner: Wexford Science + Technology General contractor: Okland Construction Architect/designer: HKS and SmithGroup Location: 850 N. 5th St., Phoenix Size: 227,113 SF Value: $77 million Brokerage: Colliers Start/completion: March 2019/December 2020 Why it’s awesome: 850 PBC is the first purpose-built life science building in the Phoenix metropolitan area. LEED Gold-certified, it offers seven floors of laboratories, offices and research space, complete with floor-to-ceiling windows. An advanced air-filtration system, including once-through air in all labs, and touchless fixtures promote health and wellness. The modern lobby features custom local artwork, a restaurant, stage and outdoor covered patio. 32 | September-October 2021

COOL OFFICES Cavasson East

Owner: Nationwide Realty Investors General contractor: Layton Construction Architect/designer: Columbus Architectural Studio Location: Loop 101 and Hayden Road Size: 460,000 SF Brokerage: Lee & Associates Start/completion: July 2019/May 2021 Why it’s awesome: This multitenant office building is anchored by Nationwide Insurance. Spacious indoor areas feature an airy palette of white, grays, blues and orange, accented by warm woods and gleaming stainless steel. Amenities include a cafe and dining hall, gym, medical office, lactation stations and event spaces. Employees can also take a refreshing respite on two large outdoor patios, complete with seating and lush landscaping.

Centuri Group, Inc.

Owner: CBRE General contractor: NPL Construction Architect/designer: Evolution Design Inc. Location: 19820 N. 7th Ave., Phoenix Size: 55,592 SF Brokerage: Newmark Knight Frank Start/completion: 2019/2020 Why it’s awesome: When the energy construction company decided to consolidate several workplaces into one headquarters, it required a large office space that allowed for many departments to work efficiently. An edgy design motif that incorporates the company’s hexagonal logo was implemented throughout in the form of decorative partitions, light fixtures and finish patterns. Interior details include polished concrete floors, black hardware and light fixtures, and sleek glass. Warmth is brought in through branding walls, clad with medium-toned wood, and a decorative wood slat ceiling that hovers above the break room.

E&K Drywall

Owner: CDM Capital Group General contractor: E&K Drywall Architect/designer: Cawley Architects Location: 1802 W. Knudson Drive, Phoenix Size: 11,500 SF Start/completion: Q4 2019/Q3 2020 Why it’s awesome: As part of a 26,647-squarefoot tenant improvement project, the new office was conceived by the owners as a showcase for their drywall capabilities and artistry. Unusual drywall applications are incorporated throughout, including a conference room ceiling crafted solely of beautifully lit drywall “beams.” The fun yet practical office features colorful interior elements and innovative space planning. Vibrant hues throughout and a creative wall planter are focal points of the project. 34 | September-October 2021

Gensler Phoenix

Owner: LBA Realty General contractor: 180 Degrees Architect/designer: Gensler Location: 2575 E. Camelback Road, Phoenix Size: 10,000 SF Start/completion: February 2019/June 2020

Why it’s awesome: Gensler created a new Living Lab workplace model where work and process are fully on display, and where the team and clients can mingle and mix. The 100% agile setting embodies the company’s culture of openness and collaboration and supports the

way its designers want to work. Focus rooms, a makerspace, resource library and virtual reality station are balanced by work and social areas. Lifestyle amenities, including a cafe, patio, lockers and a wellness room, bring comfort and convenience to the office.

Grand2

Owner: Lincoln Property Company General contractor: Holder Construction Architect/designer: McCarthy Nordburg Location: 1033 W. Roosevelt Way, Tempe Size: 358,800 SF Value: $187.5 million Brokerage: Lincoln Property Company Start/completion: April 2018/January 2020 Why it’s awesome: This stunning building, the Arizona headquarters for DoorDash, features an exceptional level of interior amenities, including a 13,000-squarefoot indoor/outdoor lobby with contemporary-meetscomfort furnishings, small- and large-group dining and conference areas, a TV wall and an on-site gym with the latest Peloton and Mirror equipment. A 13,000-squarefoot rooftop deck offers shaded seating, game areas, sweeping city and mountain views, and catering. 35

COOL OFFICES InfoArmor @ Portales

Owner: Form Property Services General contractor: Wespac Construction Architect/designer: Evolution Design Inc. Location: 4800 N. Scottsdale Road, Scottsdale Size: 22,568 SF Value: $1.3 million Brokerage: Transwestern Start/completion: February 2020/January 2021 Why it’s awesome: The new headquarters for the identity protection company showcases a clean-lined modern and industrial aesthetic. Existing raw concrete flooring and columns were maintained throughout, and wood accents and dark deck colors were utilized. Overall, the design provides a sophisticated business environment while keeping the space open and welcoming for employees.

Northrop Grumman

Owner: SunCap Property Group General contractor: Graycor Construction Company Architect/designer: Gensler Location: 100 S. McQueen Road, Gilbert Size: 120,000 SF Start/completion: September 2019/October 2020 36 | September-October 2021

Why it’s awesome: This administrative and engineering building infuses elements of outer space within a Sonoran Desert context. Gradient hues represent the layers between space and earth, and a suspended satellite hovers above

the main lobby. A 300-seat subdivisible meeting space, on-site cafe and outdoor patio support collaboration, while frosted glass doors, suspended acoustical tiles and re-imagined workstations enhance privacy and reduce noise.

SOLLiD Cabinetry

Owner: SOLLiD Cabinetry General contractor: LGE Design Build Architect/designer: LGE Design Group Location: 2615 E. Germann Road, Chandler Size: 251,000 SF Value: $25.1 million Start/completion: April 2020/August 2021 Why it’s awesome: Approximately 6 acres under roof house manufacturing equipment imported from around the world as well as 50,000 square feet of Class A office space. The expansive two-story lobby showcases luxe finishes, including a solid walnut reception desk and fluted marble back wall. Polished concrete flooring complements rich wood tones, white stone surfaces and black steel accents. Eye-catching light fixtures and modernist furnishings complete the look.

Opendoor

Owner: Fenix Development General contractor: Stevens-Leinweber Construction Architect/designer: Ajanta Design Location: 430 N. Scottsdale Road, Tempe Size: 103,000 SF Value: $7.5 million Brokerage: JLL Start/completion: April 2020/January 2021 Why it’s awesome: Opendoor’s new “homequarters” spans three floors at The Watermark, overlooking Tempe Town Lake. The interiors welcome with residential-style touches, such as hallway shelving where staff can contribute personal display items. Work areas are broken up by “neighborhoods,” each with its own individual living room. Shared areas include meeting rooms, kitchens, lounges and open workspaces with stunning views. Direct and indirect lighting, and acoustics that vary scale and soundscapes, produce a calm, productive work environment.

COOL OFFICES SOURCE

Owner: Plaza Companies General Contractor: Jokake Construction Architect/designer: Phoenix Design One Location: 1465 N. Scottsdale Road, Scottsdale Size: 24,430 SF Start/completion: February 2020/November 2020 Why it’s awesome: SOURCE wanted its new headquarters to be connected to nature. A neutral palette and elemental materials combine for an office that is open and serene. Full glass fronts flood the central collaborative space with natural light, while white walls make the interiors feel even more airy. Circular lighting and round ceiling panels mimic clouds and the sun. Raw materials, such as metal, polished concrete and stone, and natural elements, including preserved moss and other greenery, add to the organic feel.

The Collab

Owner: Creation RE General contractor: LGE Design Build Architect/designer: LGE Design Group Location: 325 N. Ash St., Gilbert Size: 40,559 SF Value: $6 million Brokerage: Cushman & Wakefield Start/completion: Q4 2018/Q2 2021 Why it’s awesome: Located within walking distance to downtown Gilbert’s thriving Heritage District, the building features large covered patios, ground floor retail spaces and modern build-to-suit offices with amazing views. The interiors showcase an urban industrial aesthetic with polished concrete flooring, raw brick and warm wood accents, and bold artwork. 38 | September-October 2021

The Alexander

Owner: George Oliver General contractor: RSG Builders Architect/designer: George Oliver Design Location: 25 S. Arizona Place, Chandler Size: 112,000 SF Brokerage: JLL Start/completion: March 2020/January 2021 Why it’s awesome: The Alexander replaces the traditional office with wellness-inspired programming, collaborative workspaces and a focus on personal growth. Amenities include a yoga studio, Kaleidoscope organic juice and coffee bar, library, billiards room, mother’s room, 50-person training center, multiple outdoor areas and a dog-friendly patio. Touchless amenities and an upgraded HVAC system underscore the developer’s understanding of pandemicrelated market, tenant and employee needs.

Voya Financial

Owner: Voya Financial General contractor: Willmeng Construction Architect: Balmer Architectural Group Interior design firm: RSP Architects Location: 1700 S. Price Road, Chandler Size: 147,548 SF Value: $14.7 million Start/completion: August 2019/April 2020

Why it’s awesome: Occupying three floors of Building 16 in the Allred Park Place development, this open-concept office offers a modern and airy vibe, with large banks of windows and a glass wall system throughout, concrete accents and a vivid color palette. Amenities include a kitchen/meal prep area, inviting dining areas, two large training rooms and

collaboration spaces. High-end finishes, including large-format tile on the floors and elevator walls, lend a sophisticated touch. Built with sustainability in mind, it features LED lighting with automatic controls and incorporated materials made from recycled content for carpeting, wall coverings, ceiling tiles and fabrics.

WHYFOR

Owner: WHYFOR Architect/designer: James T. Flynn Location: 1545 W. Thomas Road, Phoenix Size: 3,984 SF Built: 1974 Reimagined: Q2 2021 Why it’s awesome: When the pandemic sent workers home, WHYFOR’s owner transitioned his empty office space into a creative co-working hub. Built of glass, concrete and steel in 1974, the building benefits from a minimalist design, modern lines and an abundance of natural light. Interior atriums and indoor-outdoor spaces fuel creativity. The structure is accented by intriguing artwork, midcentury modern furnishings, a sliding glass door-enclosed conference space and a handful of private offices. 39

CITY OF TEMPE

TEMPE’S TRAJECTORY

s Arizona rebounds from the pandemic, its population is increasing, new projects are transforming the skyline, and travel and tourism are bouncing back. Like other cities in the Greater Phoenix area, Tempe is a leader when it comes to growth and development in the state. The last couple years saw Tempe pivot from a university town into the Valley’s second largest urban center, but rapid change brings not just economic success but also challenges. From demands for additional workforce and affordable housing, to attracting businesses that provide high-paying jobs, to ensuring enough space for visitors — including the thousands who come every year for events at Arizona State University (ASU) — INNOVATION CORRIDOR

40 | September-October 2021

Forum looks at what the City of Tempe’s growth means to the Valley

Tempe is dedicated to meeting the needs of its residents as well as current and potential industries. With about 40 square miles of land, Tempe is nearing build-out capacity. In early 2021, the city expanded its boundaries for the first time since 2006, adding slightly more than 17 acres in a portion of the North Tempe county island, located south of East Curry Road, west of North Miller Road and north of Gilbert Drive. The site will house a phased mixed-use development featuring approximately 650 residential units and retail opportunities. Housing, like land, also is in high demand. Approximately 190,000 residents live within Tempe’s city limits, and as the city continues to develop, it relies on a large population

of commuters to operate. Currently, more than 20 housing, multifamily and mixed-use projects are in development or approved. They will bring about 3,000 residential units to the region. Another 20-plus projects are in review. Tempe is also home to approximately 50 million square feet of industrial and office space. More than a dozen large-scale developments that will add upwards of 3 million additional square feet are in the works. And even though the city recently welcomed the opening of The Westin Tempe, its largest new hotel in nearly four decades, another 10 hospitality projects are on the horizon.

CONTINUED GROWTH Currently, there are about 60 largescale projects underway in Tempe,

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CITY OF TEMPE Fueling the Economy To provide an in-depth look at the health and current trends in commercial and residential real estate, AZ Big Media and the City of Tempe are proud to present Fueling the Economy: The City of Tempe. “The City of Tempe has been at the center of many of the state’s biggest business relocates and expansions,” notes Michael A. Gossie, editor in chief at AZ Big Media. “It’s important to look at the successes Tempe has had and share some of the city’s best practices so other

with a slightly larger number in review, that are expanding the city to the far edges of its borders and will bring in thousands of jobs, luxury living and high-end accommodations, as well as new public transportation options. Here’s a look at some of the most talked-about developments. Novus Innovation Corridor: Located adjacent to the ASU campus, this 355-acre multiphased mixeduse complex is projected to generate an economic impact of $1.86 billion and create almost 34,000 jobs by 2035. Some of the more than 10 million square feet of projects completed or under construction include the 2.1 million-square-foot Marina Heights office building, the 693-room Hyatt House/Hyatt Place hotel, the 278-rental-unit Piedmont residences and the 281,000-squarefoot Interdisciplinary Science and Technology Building (ISTB) 7. The corridor is a partnership between Catellus Development Corporation and ASU’s University Real Estate Development Team. 250 Rio: On Sep. 1, Hines purchased 1.8 acres of land for a new 14-story office building overlooking Tempe Town Lake. The project will include a 216,000-square-foot Class AA 42 | September-October 2021

Valley municipalities can learn from Tempe’s triumphs and, hopefully, duplicate some of those economic wins.” Industry insiders and local dignitaries, including a special introduction by Tempe Mayor Corey Woods, will provide expert insight into the city’s current growth and what it means for the government and people now and in the future. A trio of panel discussions will examine three important issues facing Tempe today: development, hospitality and housing.

office building and accompanying parking structure. It will complement Hines’ 100 Mill, an 18-story office development across the street. The Westin Tempe: At 18 stories tall, with 290 spacious guest suites and approximately 21,000 square feet of indoor and outdoor event space, the

CITY OF TEMPE

FUELING THE ECONOMY Thursday, September 23, 3-6 p.m., Tempe Center for the Arts, 700 W. Rio Salado Parkway.

Tickets are available for purchase at azbigmedia.com. Westin Tempe began welcoming guests at the end of August. Located just blocks from ASU’s Sun Devil Stadium, the gleaming tower also provides a refreshing boost to Mill Avenue’s food options, with three dining concepts and the Valley’s highest

open-air rooftop bar and lounge. The hotel is owned and developed by CAI Investments and managed by Crescent Hotels & Resorts. Banyan North Tempe: Situated minutes from downtown Tempe and approximately 1 mile from ASU, this $177 million multifamily development will offer 651 units ranging from studios to four bedrooms. The recently annexed project site in the North Tempe county island will provide residents with easy access to employment centers in Tempe, Scottsdale and Phoenix. Designed by Todd & Associates, the first-class complex will also feature such state-of-the-art amenities as resortstyle pools, a fitness center, dog park, clubhouse and more. Tempe Streetcar Project: As development increases and Tempe’s population of residents, workers and visitors grows, public transportation will help ease congestion. The first modern streetcar line in the Valley will follow a 3-mile-long loop, with 14 stops along the way, linking downtown Tempe, ASU and the emerging employment corridor of Rio Salado Parkway, with connections to Valley Metro Light Rail to Downtown Phoenix. Testing of the first two of six vehicles began in June.

INDUSTRIAL DEVELOPMENT

The Industrial Edge Available land and increased infrastructure are propelling industrial development in the Valley’s southeastern and western peripheries By KYLE BACKER

he past few years have seen unprecedented growth across Greater Phoenix. A favorable business environment, mild winters and an overall high quality of life have attracted corporations from across the nation and globe to the Grand Canyon State. As a result, farmland and empty plots throughout the Valley have rapidly become the sites of large manufacturing and distribution facilities. “Industrial has been the darling of the recession and the COVID response. It’s the one use that excelled above the PARK 303

44 | September-October 2021

rest and had the most energy, money and interest behind it,” says Adam Baugh, partner at Withey Morris. Both the East and West Valley have received the lion’s share of industrial investment. According to Baugh, there’s been nearly 20 million square feet of ground broken so far in 2021. The trifecta of high demand, investor interest and available land have led to atypical behaviors in the market. “You typically wouldn’t build until you got a user, but demand is so hot that people are willing to build on

speculation. Traditionally, developers wouldn’t spend that amount of money because of the risk,” Baugh notes. In particular, Mesa to the east and areas along the Loop 303 to the west have attracted the majority of new structures and expansion projects. John Orsak, vice president of real estate development at Lincoln Property Company, believes the Loop 303 will continue to attract large mega-users with million-plus-square-foot projects because of the area’s availability of land and ease of access to California’s ports

Adam Baugh

Brian Friedman

via Interstate 10. Cities on the east side of the Valley, such as Mesa, primarily will carry on with building smaller to midsize projects. “There are different product types and users when you compare East Valley versus West Valley. You may find a huge Amazon distribution center in the West Valley, and you’ll see a last-mile distribution center in the East Valley. Both regions are experiencing booms in different kinds of product types,” explains Orsak. “It’s a testament to the overall Greater Phoenix market — the affordability, housing opportunities, available labor and the amount of people moving here who need jobs.”

Randy Huggins

John Orsak

WEST SIDE STORY About 5 miles of the Loop 303 passes through Glendale. In 2018, there were no buildings along that stretch, but now about 14.8 million square feet of industrial space are either under construction, recently completed or in the early stages of development. “A lot of people struggle with envisioning the scale of 14.8 million square feet because it’s not like a house that is 3,000 square feet,” says Randy Huggins, economic development officer for the City of Glendale. “To put it into perspective, regional malls generally are a million square feet. So there are 15 Arrowhead Towne Centers that exist

Jeanine Jerkovic

William Jabjiniak

out where there was nothing at all two years ago.” Lincoln Property Company developed Park303 in Glendale’s New Frontier District with flexibility in mind. It was originally designed as two separate buildings that could be combined if desired. Orsak says that Park303 was created with a Class A office approach rather than as just a big box, complete with nearly 5,000 square feet of outdoor space with design flourishes and architectural flair on the building’s exterior. “Ultimately we leased the structure to one tenant and are wrapping up our building combination. It’s nearly 1.3 million square feet, which is 29 acres

303 LOGISTICS

INDUSTRIAL DEVELOPMENT under one roof,” Orsak remarks. “The driving lanes around the building were arranged to keep cars and trucks separated so employees and the vehicles that are bringing product in and out aren’t mixing in traffic.” On the west side of the Loop 303, just south of Glendale Avenue, Barclay Group and W.M. Grace Companies built a structure, known as 303 Logistics, that also sold before construction completed. “The stories keep coming of people building on spec, and before they’re finished, they have an end user. It’s great to have shovel-ready sites, but it’s even better to have people consuming the buildings,” Huggins points out. The intense demand has precipitated a sharp increase in land prices. Huggins notes that in 2002, the large 80-acre plots many developers sought were selling for 23 cents per square foot. In 2016, that price point had increased to 75 cents. Today, costs hover around $6 per square foot. “There’s been a tenfold increase in three years, and prices are still going up,” says Brian Friedman, director of economic development at the City of Glendale. “It’s due to demand but also to having the proper infrastructure in place.” MAJESTIC FALCON FIELD

46 | September-October 2021

Friedman further places the growth in context: “The City of Glendale was founded in 1910. It took 111 years to build about 14 million square feet of industrial buildings citywide. In the last three years alone, we’ve doubled it.” Close to where the Loop 303 meets Interstate 17, Taiwan Semiconductor Manufacturing Company (TSMC) is investing $12 billion on the development of a new factory, a move that will attract other companies within its supply chain to the Valley. The City of Surprise is in a prime position for related businesses to locate. “Taiwan Semiconductor Manufacturing is going to bring many talented people and companies to the area. We’ve already had great conversations and meetings with companies that are in the TSMC supply chain,” says Jeanine Jerkovic, economic development director for the City of Surprise. “We have an opportunity to curate our future employment corridor and attract head-of-household jobs and quality employers.”

SOUTHEAST SPREAD On the opposite side of the Valley, Mesa has experienced a similar deluge of activity.

“Industrial development in Mesa has been white hot,” says William Jabjiniak, economic development director for the City of Mesa. “By our calculation, there’s a bit more than 10 million square feet of industrial space either in the planning stage, under construction or nearing completion. And much of it is being leased before it’s finished.” In northeast Mesa, near Falcon Field Airport, an array of industrial projects is in motion. “There is industrial spec development by Majestic Realty right at Greenfield Road and the Loop 202. That’s about 150,000 square feet combined between two buildings that will be completed by the end of the year,” Jabjiniak notes. “One of Amazon’s first last mile distribution facilities also is in the Falcon Field area. Boeing is expanding its operations nearby. And just south of the airport, we’ve seen industrial developments that include Mitsubishi Chemicals.” The Elliott Road Technology Corridor, which runs between Signal Butte Road and Hawes Road, plays a strategic role in Mesa’s aim for hightech manufacturers, according to Baugh. “The corridor has power, land,

water, natural gas, fiber, market access, quick entitlement process, Foreign Trade Zone and a willing municipal partner with Mesa,” he explains. “Under an existing zoning overlay, the City of Mesa has been able to streamline its process for potential developers and applicants, which reduces the entitlement time down to weeks instead of months for qualifying properties.” Facebook recently announced that it’s locating an $800 million data center in the corridor, joining other industry leaders, including Apple, Amazon, Google, Edgecore and Dignity Health. Farther south, near Phoenix-Mesa Gateway Airport, electric vehicle manufacture ElectraMeccanica broke ground in May on its first U.S.-based assembly plant and technical center on 18 acres of land. The $35 million, 235,000-square-foot facility will bring an estimated 500 technology jobs to the area. According to Jabjiniak, much of the industrial activity in the city is concentrated in the southeast — a trend he sees continuing in the coming years. “About a year ago, CMC Steel announced a $300 million investment in deep southeast Mesa,” Jabjiniak recalls. “The vast majority of industrial

development is taking place in that area because that’s where we have the most open land.” Baugh points out that noise contours, areas with potential significant aircraft noise exposure, limit the type of buildings that can be constructed near airports. “But industrial developments work really well on those sites,” he says, adding that “today’s modern industrial is not like anything in the past. The buildings are highly designed, they’re extremely efficient, and they work for both manufacturing and distribution.” Much like Glendale, part of what makes Mesa attractive is the available land and quality infrastructure, including the completion of the southern portion of the Loop 202, which bypasses Phoenix and reduces travel time to the Los Angeles Basin and its ports. “Thousands of acres are ready for development,” Jabjiniak explains. “We’ve come to a point where our investment in infrastructure is paying off.” To complement the existing infrastructure, Mesa is working on bringing rail to the southeastern part of the city. “We’re planning for what we call PIRATE, which stands for Pecos

Industrial Rail and Train Extension,” Jabjiniak says. “That has created a lot of interest from employers who need access to rail, and it helps us keep big trucks off the roadways to let residents move around.” Jabjiniak concludes that Mesa and the Loop 303 areas share many strengths that will continue to attract further investments. “Why are both areas so strong? A few things to come to mind,” he says. “There’s a lot of developable land as well as a tremendous transportation system in place. But there’s one more thing we do in Mesa, which has helped not just developers but also end users: streamlining the entitlement process. Time is money. The ability to move quickly has been one of the hallmarks of this city in general. Mesa is a big city, but it can turn on a dime.” In just a few short years, Greater Phoenix has become one of the nation’s fastest growing hotbeds of industrial development, with areas along Loop 303 and in Mesa seen by developers and users as diamonds in the desert. While those two regions flourish, the entire Valley benefits from the jobs, tax revenue and networking effects that come with increased investment.

ELECTRAMECCANICA

AMA

NOT IN MY BACKYARD The need for rental housing is burgeoning, but some Valley cities are resistant to multifamily development By KYLE BACKER

place to live in Greater Phoenix is becoming harder to attain. While homeowners have enjoyed a dramatic increase in the value of their investments, those in the rental market have seen a larger percentage of their paycheck eaten up by rising housing costs. A market report by online real estate company Zillow found that rents rose 17.7% year-overyear in the Phoenix area as of May 2021. Another Zillow study forecasts that by the fourth quarter of this year, typical renters in Greater Phoenix will become housing burdened, meaning that more than 30% of their income

48 | September-October 2021

will go toward keeping a roof over their heads. As a result, the Phoenix metro will drop from the 29th to 38th most affordable metro in the U.S. “It’s Economics 101: the law of supply and demand,” says Courtney LeVinus, president and CEO of the Arizona Multihousing Association. “When the supply of something is low but demand is high, the price goes up in response. Rent works the same way. When we have a robust supply of rental housing in the Valley, rental costs tend to remain steady, but when we have a shortage of rental units — and thousands of people moving to Greater Phoenix every month — then rent increases.” A study commissioned by the National Multifamily Housing Council and the National Apartment Association estimates that the

Phoenix metro needs 150,000 additional rental units by 2030 to meet demand. To hit that target, the pace of current rental construction levels would need to hasten. “In the 1980s, Greater Phoenix saw 105,905 multifamily units built. In the following three decades, the production plummeted, and we averaged 47,000 units per decade after the ’80s,” LeVinus notes. “We built up a great supply in the 1980s that made Arizona’s housing stock quite affordable, but now we are clearly not keeping up with demand.”

IN THE ZONE When a developer is looking to build a new apartment complex, the first step is to find land that is properly zoned for multifamily housing. Lots

Nana Appiah

are given zoning designations based on a city’s general plan that is put before and approved by voters. The intent of a general plan is to guide long-term development inside the municipality, though changes can be made as needed. Other requirements and limitations may be attached to the property, such as compelling the builder to install a traffic light or capping the maximum height of the structure. Tim Curtis, director of current planning for the City of Scottsdale, says projects that fit within the present zoning parameters have little trouble acquiring building permits. “If you already have the zoning for a multifamily project, and you’re happy as the developer with the building height and density that’s allowed, it’s really easy,” he explains. “The degree of difficulty would probably increase if the project doesn’t match what is already contemplated in the general plan and zoning.” LeVinus admits that simply developing within spaces designated by a city’s

Tim Curtis

Courtney LeVinus

general plan sounds logical, but she believes it’s unrealistic. “If you scan the available land in communities across the state, you find that comparatively little land has been zoned for multifamily developments. That means virtually every new apartment development in Arizona must go through the rezoning process,” she notes. “Rezoning is not easy. It’s expensive, there are enormous bureaucratic challenges, and it’s a long slog, timewise.” A developer may want a lot to be rezoned for a variety of reasons. For example, an apartment building may need more units than is permitted in order for the investment thesis to be realized, otherwise the investor cannot turn a profit. Curtis adds that the city doesn’t control the sale price of the property, which affects the feasibility of the project. “If your expectation is just to comply with the zoning, then you’re a happy camper and not necessarily complaining about how difficult it is to get permits,”

Kevin Mayo

he says. “But if your investors are expecting a certain rate of return that forces you to go to five stories, the city may be a bit apprehensive about that. The formula developers use to gauge their satisfaction, which is primarily capitalistic, is different than the formula that cities are using to build the community that they envisioned.” LeVinus argues that the arbitrary zoning designations that make multifamily construction onerous have worsened the current housing crisis. “Rather than allowing the market to correct itself, local governments keep stepping in to artificially constrict the market by limiting growth in their communities,” she says. “If local government would get out of the way and allow the apartment community to respond to market forces, we could climb out of the hole relatively quickly.”

PUBLIC OPINION Part of the rezoning process involves hearings in which residents can offer

AMA their thoughts on the proposed development in hopes of swaying city council members to either approve, deny or impose conditions on the project. Most participants at these hearings do not want apartments built because of a perceived threat to or degradation of their lifestyle. These attitudes are considered not-inmy-backyard sentiments, known as NIMBYism. Nana Appiah, planning director at the City of Mesa, believes that the role of his department is to administer the city’s general plan and zoning ordinance, which strongly encourages residents to get involved in the process. He says a common contention he encounters at zoning hearings, and one that is argued throughout the country, is that multifamily housing will lower the property values in the surrounding area. Quantifying a connection between apartment construction and decreased home prices is murky, according to Kevin Mayo, planning administrator for the City of Chandler. “We haven’t seen that in the current market. I don’t think anything’s affecting our property values except for raising them up,” he says. In Chandler, residents’ top concern is traffic. “Thousands of multifamily units have been built and delivered to the market around the Chandler Municipal Airport in the last 36 months,” Mayo remarks. “Homeowners who live south of the airport had gotten used to what

50 | September-October 2021

their normal commute was. Now there’s a 20% increase in traffic volume on the road. Even though the city has a traffic impact analysis that shows that the road is currently operating at 40% capacity, it still feels like an entirely different world for the citizens.” Furthermore, social media has allowed NIMBY groups to organize online and attend zoning hearings for developments that aren’t in their neighborhood. LeVinus recalls cases where neighborhood residents have been neutral or in support of a nearby multifamily project, but outside NIMBY advocates have stirred up controversy. “The more noise that surrounds a project, the more risk averse local officials seem to become,” she says. Appiah, who wrote his doctoral dissertation on citizen participation, thinks that people expressing their views is a positive thing, even if they don’t live nearby. “We encourage our residents in Mesa to participate and get involved in every activity that is going on as part of creating a complete community,” he says. “What is built in the city is important to everyone who lives outside the immediate vicinity of the project.” The result of these hearings typically produces a series of requests from the city council. “Every project has an element of back and forth to get to the finish. What we’re frequently seeing now is a set of requests meant to make

a development more palatable for neighbors — such as an art installation, a massive green belt, more sustainable elements, or more design nuance and treatments. These additions inevitably add considerable costs to a project — costs that ultimately are reflected in higher rent,” LeVinus remarks. “Its ironic that the same local officials who request such pricey additions are often the very leaders who complain about their community’s lack of affordable housing.” With recent U.S. Census Bureau data identifying Greater Phoenix as the third fastest growing metro in the nation, trends point to a continuous stream of people making the Grand Canyon State their home. What remains to be seen is if transplants will keep coming if rising housing costs, rental or otherwise, persist. “The City of Phoenix seems to understand the need for housing and is trying to keep up with growing demand. Others are restricting supply that is further exacerbating the affordable housing crisis,” LeVinus says. “What stings even more is that this resistance to new development is prevalent in areas where the demand for rental homes is high and rising with each passing day. This mentality to limit growth isn’t sustainable — not if we want the Arizona economy to continue to grow and we want to keep rent and the cost of living manageable for all residents, no matter what they earn and where they want to live.”

Scottsdale Entrada Mixed-use Multifamily Development

AMA

Eye on the Future Q&A with AMA Board Chair Reid Butler

eid Butler, the 2021 board chair of the Arizona Multihousing Association (AMA), has been in the apartment business since the mid1980s, first with Evans Wythecombe Residential before moving to Legacy Partners. He started his own firm, Butler Housing Company, in 2001. In addition to working as a developer and property owner, Butler has been a longtime member of the AMA, starting out in government affairs and working his way up through the leadership. AZRE Magazine caught up with Butler to learn more about the benefits of AMA membership and his vision for the organization.

AZRE: What value does the AMA offer its members? REID BUTLER: The strength of the AMA is its ability to bring together people at local, regional and national companies that are making a difference in Arizona, as well as leaders in local and state government. The AMA connects us and helps us really understand each other. A great example of this happened during the pandemic. We have a large board, almost 50 members, and every two weeks, we would get together to talk about best practices and share what we were doing to protect our staff and our residents. I was impressed to see so many competitors dispensing trade secrets. 52 | September-October 2021

AZRE: Multifamily development is exploding in the Greater Phoenix region. Can the Valley maintain this level of growth? RB: When I moved to Arizona in 1960, the population in Metro Phoenix was 558,000 people. In 2020, that number was 4.5 million. In the last 10 years, the city has added about 100,000 residents annually — about 40,000 new households per year. Historically, about 35% of the population live in rentals. That’s 14,000 new apartments. Now, we have a much larger pipeline maybe 20,000 to 25,000 units, but the pipeline takes two or three years to get all the way from early ideas to to construction and leasing. So the issue isn’t demand but supply constraints. I think the growth will continue as long as we keep an eye on the challenges.

AZRE: What are some issues facing the multifamily industry in Arizona? RB: One of the big challenges is the current anti-apartment mindset in certain communities. They feel as though they’re getting enough density and growth and maybe it’s time to slow some of that down. As an industry, how do we make the case that the kind of urban projects we’re building fit within the broad range of housing needs for every community?

AZRE: What are your goals for your term as chairman? RB: The main goal is managing the

effects of COVID-19. The pandemic has caused so many adjustments in which the government, under its public health responsibilities, has intervened with housing relationships between property owners and tenants. Now, more than ever, we need to work with the government and find a balanced way to allow the industry to function properly while continuing to take care of our residents. I’ll also be working on the future of housing. Do we need to become a little more green? Do we need more solar? It’s a big discussion. Arizona has become a lot more urban, and we’re seeing a lot more infill growth, which to me is smart. But the AMA always wants to look toward the future and see what trends we should lead the way on.

AMA

HOUSING CRISIS What the eviction moratorium means for the future of Arizona’s rental industry By REBECCA L. RHOADES

n Aug. 3, the Centers for Disease Control and Prevention (CDC) issued a new moratorium to temporarily halt eviction in counties where COVID-19 is spreading rapidly, which includes Maricopa. This new stay, which the U.S. Supreme Court vacated on Aug. 26, came only two days after the expiration on July 31 of a federal moratorium that began, in various forms, on March 27, 2020. According to the Arizona Multihousing Association (AMA), while some have viewed the moratoriums as necessary policy interventions, many housing experts warn that continued deferment will not only halt future investment but may permanently push small investors out of the market entirely. “The federal eviction moratorium has meant that many rental property owners have gone nearly 18 months without collecting rent. In some cases, renters have accrued more than $20,000 in rental debt,” says Courtney LeVinus, president and CEO of the AMA. “Yet all of these owners are still required to pay their mortgages, property taxes, insurance and costly repair bills, regardless of whether or not the renter is in default.” A survey conducted by the National Rental Home Council in early 2021 found that, as a result of these moratoriums, 30% of single-family rental home property owners say they will be forced to tighten standards when evaluating future rental applications, 11% have been forced to sell at least one

54 | September-October 2021

of their properties, and 12% have been forced to sell all their properties. Even if a fraction of these estimates proves true, the effects on the rental industry will be long-lasting. “Historically, the market has been 50-50 smaller landlords vs. institutional ones,” explains Mark Zinman, attorney and partner at Zona Law Group, which focuses on residential property management issues. “If a large management company has even one tenant out of 10 who doesn’t pay indefinitely due to a moratorium, it’s going to increase rents to account for that loss of income. The mom-and-pops will be forced to sell off their assets or transfer them to the institutional investors and permanently decrease the amount of stock on the market. Either way, you’re going to end up with the same result of increased rents.”

A MORATORIUM MUDDLE While many experts predicted a surge in eviction filings immediately following the cessation in July of the initial federal moratorium, Zinman’s office did not see an outpouring of pleadings. “Property owners realize that they’re better off keeping someone in a home who is paying them maybe 70% of the rent and following a payment plan as opposed to evicting them and not getting another tenant or, worse, finding one who ends up filing for bankruptcy. Eviction is a last option,” he says. Federal emergency rental assistance is available, but unlike other pandemic-

Courtney LeVinus Mark Zinman related programs, money has been slow to reach those affected. According to the AMA, Arizona received about $1 billion in federal funding, but only about 17% has been allotted so far. In order to qualify for rental assistance, both the tenant and landlord must sign and submit a declaration form, and even then, the process is complicated and applicants face extreme scrutiny by the government. The antipoverty nonprofit Wildfire, which was contracted to distribute $22.5 million in aid, noted that 36% of landlords were denied funds. While it could take years for all of the issues and lawsuits surrounding the moratoriums to be resolved, one thing is certain: The current crisis, combined with threats of future moratoriums has caused many investors to pull out of an already tight market. “We’re in the position of potentially losing 10% of our stock because owners are exiting the market,” says LeVinus. “That should scare everybody.”

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Too much, too little or just right? Applying the Goldilocks Principle to the Valley’s industrial growth By KYLE BACKER

reater Phoenix has earned a reputation as an attractive place for industrial developers thanks to a business-friendly environment, well-built infrastructure and the region’s proximity to trade ports in California. These are some of the factors that led Taiwan Semiconductor Manufacturing Company (TSMC) to build a $12 billion chip plant in North Phoenix and Intel to spend $20 billion expanding its operations in Chandler. “We’re in the 11th year of a very strong industrial market, and we just posted the 45th consecutive quarter of positive net absorption,” explains Pat Devine, senior vice president of the U.S. region for Artis REIT.

60 | September-October 2021

While industrial growth is a boost to the region, there can be too much of a good thing. Does the Valley have a glut of development? Not enough? Or, as Goldilocks says, is it just right?

COVID-19 GROWTH During the onset of the pandemic, people around the nation hoarded supplies, and headlines concerning the lack of toilet paper were in nearly every newspaper. Prior to the crisis, many companies depended on just-intime inventories, which meant most locations only kept the bare minimum supply of product on hand before the next shipment arrived. While this corporate model is efficient, some businesses are rethinking the need for

having more inventory at the ready in stores in order to be prepared for potential crises. “We’ve seen a change in supply chain strategies from just-in-time to just-incase to hedge against disruptions in a user’s supply chain, which leads to the need for more warehouse space,” Devine says. The vulnerability of global supply chains caused businesses to reassess how materials are sourced. “Companies realized how susceptible they were to international trade when they stopped having access to things that were exclusively produced overseas, which halted certain processes and productions. I think people started immediately looking at ways to mitigate that risk, which for us, luckily, means more domestic manufacturing,” comments Nic Fischer, investment officer at Merit Partners. Bringing manufacturing processes back to the U.S. is becoming more common, with Southern California being a prime destination. Greater HELLO FRESH: The meal-kit delivery company leased space in the Prologis Logistics Center IV. (Photo: Hello Fresh)

Phoenix, however, benefits from the increased competition for limited industrial real estate west of the Colorado River. “There’s a trickle-down effect from the Southern California market because manufacturers are leasing space and taking buildings that other industrial users no longer can occupy,” notes Cooper Fratt, senior vice president at CBRE. He points to the current semiconductor chip shortage as an example of how onshoring has benefited the Valley. The massive investments from TSMC and Intel are drawing other businesses to the region. “In the market today, we’re tracking more than 20 companies that are locating here purely to serve either TSMC and/or Intel as part of their construction and expansion, as well as in their future operations. We’re seeing that those chip companies are bringing many more businesses and employees to the Valley than you read about in the headlines,” Fratt continues. Another factor exacerbating the need for warehouse space is the rise of e-commerce during the pandemic. Folks who wanted to limit physical contact with others looked to online retailers to deliver products to their front door. “There was a flight to online retail from a segment of people who, for whatever reason, were not participating prior to the outbreak but were then somewhat forced to because of limited access to brick-and-mortar retail,” says Fischer.

Pat Devine

Nik Fisher

Amazon is at the top of the heap when it comes to e-commerce, but other traditional retailers are competing for market share. “Wayfair, Best Buy, Home Depot: What were typically your big box retail stores are now establishing an e-commerce presence in places such as Arizona and other population centers that can support it,” notes Robert Guerena, managing partner at GO Industrial. “For example, Walmart just took down 1.2 million square feet along Loop 303 and Glendale Avenue.” He contends that the increase in demand from online shopping factored into Walmart’s decision-making. Public safety measures complicated restaurant dining, and many turned to meal prep delivery services, such as Blue Apron, Gobble and Freshly, for dinner. “These food supply chain-related entities had to rethink how they were working and distributing their products,” Fischer comments, adding that such services also increased demand for more warehouse space.

Cooper Fratt

Robert Guerena

Guerena continues, “HelloFresh just leased 440,000 square feet at the Prologis Logistics Center IV. We’ve seen it across all retail types: food, consumables, luxury, furniture — the whole gamut. Everything continues to migrate toward e-commerce, and the pandemic spurred that acceleration.”

GOLDILOCKS RATIO Even before the COVID-19 crisis changed the commercial landscape, Greater Phoenix was a destination for industrial users. In the northwest region, facilities such as Cives Corporation’s steel fabrication plant in El Mirage dot the landscape. In Gilbert, aerospace and defense company Northrop Grumman recently expanded its satellite manufacturing facility by 220,000 square feet. There’s no doubt that NORTHROP GRUMMAN: The company recently expanded its satellite manufacturing facility in Gilbert.

NAIOP

industrial development is taking place throughout the Valley, but is there too much or not enough — or is it growing at a sustainable pace? One key measure of a market’s health is vacancy rates. Too high of a percentage can signal undesirability to investors, whereas too low of a number means fierce competition and potentially higher costs for whatever space is available. “Since 2009, our base has grown from 272 million square feet to 345 million square feet, while net absorption during the same time period was almost 95 million square feet. That’s how your vacancy rate drops from almost 15% in 2010 to less than 6% today,” Devine comments. When looking at how much industrial space is being occupied, context is crucial to understanding what constitutes a healthy rate. Southern California’s proximity to trade ports make the region desirable for industrial users of all kinds who are willing to pay a premium. “Vacancy rates mean something different in every market,” Fratt explains. “In certain parts of Southern California, they’re less than 1%, which is low. At the end of the first quarter, Greater Phoenix’s vacancy rate was 5.58%. If you look back historically, that’s the second lowest we’ve had in the last 20 years.” According to Guerena, the current vacancy rate in the Valley is healthy, but it could change. “It’s something to keep an eye on as new developers and new competition come into 62 | September-October 2021

the marketplace and search tenant sites that may not fit the mold for a logistically convenient location,” he says. “But for core locations, such as in the heart of the Loop 303 and the southwest Valley, there are very few options for people to tour.” Fischer agrees, adding that the market is seeing historically low vacancy rates paired with record high under-construction numbers, which means anything that is being built is quickly absorbed. “You could probably argue that we’re a little underserved,” he says. “I’ve heard recently about users coming to our market and wanting to see five or six different options, but there’s only two or three good choices — and those are being looked at by other users at the same time.” “In order for Greater Phoenix to continue attracting these industrial companies and all the jobs that they bring, we need to have options,” Fratt argues. “In my opinion, the 5% to 6% vacancy range that we’ve been in for that for the past several years is a very healthy number. It allows us to have readily available buildings that companies can occupy when they come to tour. But it’s also not such a big vacancy that deters developers from continuing to build in the Valley.”

GROWTH RUNWAY Anyone who has lived in Maricopa County for a few years has witnessed the rapid expansion taking place. But development cannot continue unimpeded forever.

CIVES CORPORATION: Structures such as this steel fabrication plant in El Mirage are common in the northwest region.

“As you look at how far out becomes reasonable for Valley residents, we’ve proven that people don’t mind the sprawl, but I think some of those habits might be changing,” Fischer says. “Are we going to run out of good land that people want to occupy? If we can stay ahead of the curve with good infrastructure, I think that we’ve got a lot of opportunity in front of us. If we as a development community and as a state don’t want to make those investments, we could run into an issue where we don’t have a whole lot of available land.” Guerena believes that land constraints aren’t as big of a roadblock as labor shortages. “As we continue to add large e-commerce and distribution centers, where are the employees that can fill those centers and perform the tasks the company needs coming from? I think that’s the biggest question that employers are starting to ask themselves. It’s not just about the logistic location, but it’s where the employees are.” Fratt concludes, “I think the industrial growth that we’re seeing throughout the country — not all of it, but some — was due to the pandemic and its effects. Along with the businessfriendly environment that we have in our state, I think those two factors combined give Greater Phoenix a three-to-five-year runway for industrial development at minimum.”

NAIOP

Workplace Disrupted Following 16 months of remote employment, will the office sector ever return? By REBECCA L. RHOADES

he coronavirus changed many aspects of our daily work environment. From home offices to Zoom meetings, the pandemic presented companies with new ways to operate and opportunities to rethink safety and comfort. While there have been numerous reports about the office’s demise, reality has shown otherwise. “After the pandemic hit, we saw an immediate reaction on both sides of the Atlantic to send everyone home. Office buildings were empty, apart from a couple janitors and the odd person who needed to come in for printing or scanning,” says Martin Winstanley, an investment and asset manager for Holualoa’s U.S. and European operations. “That trend carried until the end of 2020. In January, people started getting vaccinated and antsy about sitting at home, and they slowly started heading back to the office.” Mike Garlick, executive managing director at Newmark, notes, “In the beginning of the pandemic, everyone was asking, ‘What are we going to do with all of these office buildings?’ That’s

64 | September-October 2021

in the rear view. Clearly, there will be an impact on the percentage of office space that becomes available, but I don’t think it’s going to be anywhere near as great as people initially thought.”

GATHERING MOMENTUM Lease transactions and new builds did slow down beginning in spring 2020, but the sector is picking up steam. According to Colliers Q2 2021 Greater Phoenix Office Market Report, office leasing activity has increased in 2021, and there are multiple projects currently under construction totaling more than 2 million square feet, with almost 30% of the space pre-leased. “We’re seeing more and more leases getting signed,” says Amanda Zakharov, senior vice president of acquisitions at Strategic Office Partners. “The turn of the year is when the activity started to trickle back in.” In general, businesses with small numbers of employees were the first to return to in-person work, while larger corporations continue to look to industry leaders for guidance. “A number of our tenants have said they’re waiting to see what some of their peers do before making a decision,” Zakharov continues. “A lot of big firms have taken a stand one way or the other and made public announcements about what they’re going to do.” On a national level, investment banking firm J.P. Morgan made headlines in April 2021 when its CEO

released a statement saying that 10% of its U.S.-based employees would work from home full-time and others could continue to work remotely part-time — a move that would allow the company to off-load hundreds of thousands of square feet of office space in New York City. He abruptly reversed his decision just a few short weeks later, calling all employees back to the office. And while Pinterest pulled out of a deal in August 2020 to move into nearly 500,000 square feet of office space in San Francisco, Facebook, on the other hand, signed a lease for almost 800,000 square feet in Manhattan in the middle of the pandemic. “If the office really is dead, why are companies like Facebook, which are leaps and bounds above everyone else on what remote work looks like, picking up all that space?” asks John Orsak, vice president of real estate development at Lincoln Property Company. Zakharov comments, “It’s tough. I don’t think anybody knows exactly what their workforce is going to want when they come back in full swing. There are going to be a lot of growing pains before we figure it out.”

DESIGN STRATEGY The pandemic may have opened people’s eyes to technology and ways to work outside of the office, but for most companies, a complete remote workforce isn’t sustainable. Executives cite leadership, collaboration and

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Greg Calcaterra

Mike Garlick

training — as well as corporate culture — as the main reasons for bringing employees back to an in-office setting. “The future of the office is going to focus a little bit more on culture, whereas before there was tendency to focus on density,” Orsak remarks. Some companies are allowing staff to rotate between office and home — a compromise that seems to satisfy both management and staff. “I think hybrid workplaces are going to be popular. It’s a smart idea, and it’s going to save money,” says Garlick. “But being in the office is still a critical component of the employee-employer relationship.” Others are making adjustments to help their workers feel safer while on-site. This includes increasing the distance between desks — or ditching desks altogether and replacing them with conference rooms and lounge areas — developing team suites and open meeting spaces, and adding or upgrading outdoor amenities. “One of the biggest things that’s going to change is not the number people who are working in an office space but instead how that space is configured,” Winstanley remarks. “Companies are going to be looking for more open plan offices in which they can create distancing between employees. Removable partitions and flex spaces will replace permanent walls. The hot-desking scenario will go away because that was just too many people crammed into a small space.” Samantha Parker, interior designer at Deutsch Architecture Group, agrees. She notes that while the office itself isn’t dead, the future may see the death of benching, a form of workstation in which employees sit shoulder-to-shoulder with only a tiny tabletop partition, if anything, between in individual spaces. 66 | September-October 2021

John Orsak

Samantha Parker

“Benching was really popular for a few years because of the density employers could get from a real estate operational standpoint,” she explains. “Given the current needs for social distancing and an emphasis on personal space, I think you’re going to see 6-by-6-foot cubicles becoming more of the norm. When we design new spaces, we’re using that footprint as a starting point to give people a sense of comfort and physical separation.”

“One of the biggest things that’s going to change is not the number people who are working in an office space but instead how that space is configured.” – Martin Winstanley

HEALTHY SPACES, HEALTHY WORKERS In addition to reconfiguring workstations, some companies are upgrading surfaces and fixtures to include touchless doors, light switches and faucets; easy-to-clean and –sterilize stone surfaces that can withstand an array of cleansers and wipes; and even high-tech air-filtration systems. “There were some folks who, during the height of the pandemic, were interested in ultraviolet lighting for HVAC systems,” Parker says. “That’s something we usually see in the healthcare environment to kill bacteria

Amanda Zakharov

Martin Winstanley

in the air, but I don’t know of anyone who has followed through with that because it’s cumbersome to take on, especially if you have an existing space.” Parker notes that companies that want employees to return to the office need to answer two important questions: How do they make their spaces sanitary and provide a good level of comfort for workers who are concerned about getting sick? And, how do they entice the people who find it more convenient to work at home to take advantage of the collaborative aspects and amenities that have been worked into those spaces? Deutsch recently completed its first WELL-certified project. Similar to LEED, which focuses on a building’s environmental impact and sustainability, WELL protects the health of the employees and work environment. “Being able to say that you have a WELL-certified building, that it’s truly a healthy space in which to be, will be a real advantage when it comes to attracting workers who may have heightened concerns about those things,” notes David Calcaterra, principal at Deutsch Architecture Group. With so many changes and uncertainties, it’s easy to mourn the premature death of the sector. But this isn’t the first time an obituary has been written for the office. Thirty years ago, noted management consultant Peter Drucker wrote, “Commuting to office work is obsolete.” Garlick believes that people want to come back to the office, but it’s going to take time. “I think we’ll see the market start to gain momentum in 2022,” he predicts. “I don’t want to say it will return to normal, but by the end of 2022, beginning of 2023, we should be back in full swing.”

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Investing today for tomorrow’s economy Diversity and workforce development initiatives prepare the industry for the future By KYLE BACKER

n recent decades, there has been a shift in the makeup of the U.S. workforce. People of diverse backgrounds have not only filled the ranks of the business world but also represent a growing share of leadership positions. Still, more needs to be done in some industries to diversify their employees and attract future workers. The commercial real estate (CRE) development association NAIOP is actively pursuing these goals through its diversity, equity and inclusion (DEI) efforts and partnering with organizations to promote CRE careers to high school students. “People have wrapped their heads around the fact that our industry has to change not only to survive but also to thrive,” says Steve Jordan, human resources director at Ryan Companies. “We’re committed to trying to recruit, grow and retain diverse talent in the commercial real estate industry, which has been largely dominated by Caucasian males over the years. Groups like NAIOP and companies

68 | September-October 2021

such as Ryan are going to help fuel that growth.”

ATTRACTING A DIVERSE WORKFORCE Commercial real estate is a field historically constituted primarily by white men. As the demographic makeup of the U.S. has shifted over the years, companies are learning that cultivating a diverse workforce is not only a moral imperative but also adds value to the organization. “A lot of business schools require students to read ‘Good to Great’ by James C. Collins. One section talks about how IBM kept going to the same university to recruit engineers. Those engineers were all trained in a similar way,” Jordan explains. “If you can find workers from different backgrounds, that’s going to provide a wide range of thought and perspective. Then you’ll have people who will challenge the status quo and say, ‘Why are we doing it this way? What if we did it like this?’ That’s where innovation comes from.” Jennifer Villalobos, vice president of business development and marketing at Sharp Construction, agrees. “Many organizations have seen how bringing in people from different backgrounds creates better collaboration that moves ideas forward. Companies can ask, ‘If we’re targeting a specific community with a message, do we have employees who can speak with and represent that

community?’ There’s a huge benefit from a creative standpoint when you hire a diverse and inclusive workforce.” Part of Ryan Companies’ recruiting process includes purposefully seeking out student candidates from a variety of institutions. “We want to include under-represented groups in our searches, so we go to historically Black colleges and universities and Hispanic serving institutions. We’ve targeted a few of those schools and have partnered with their professors and department heads to create a pipeline of students,” Jordan notes. He adds that the demographic trends in the U.S. point to tipping over into a majority-minority population in the next few decades. Understanding the importance of diversity, NAIOP formed a DEI committee to develop educational resources for companies that want to recruit and retain a more inclusive workforce, connect members from under-represented groups to opportunities for career growth and partner with educational institutions to introduce students from all backgrounds to CRE careers. One initiative spearheaded by the committee was putting together a speaker series about creating inclusive workspaces, along with providing ideas about how to find and retain multicultural talent. Another project under development is a mentorship program through which students from underserved communities can learn about the CRE industry from professionals. “We wanted to be able to build a committee that was just as passionate on moving the needle forward to educate the next generation of leaders, so that they want to join this industry,” comments Villalobos.

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Sam Alpert “I think a lot of people don’t even know CRE exists, and I speak from my own personal experience.” Villalobos entered the field about five years ago and says that she never realized that a career in CRE was a viable option for her. “It wasn’t even something I saw as an opportunity for me as a Latina woman,” she recalls. “That’s why we felt there was a need for this organization to start educating youth early on.”

INVESTING IN NEW TALENT As the CRE industry makes substantive moves to be more inclusive, another issue looms: construction labor shortages. In the past few decades, construction careers have been looked down upon as a fulfilling career choice for students. “Skilled craft people are retiring and not a lot of young people are coming in to replace them. There’s a huge gap,” says Mike Bontrager, vice president and general manager at Alston Construction. “For years, people thought this was just a contractor or subcontractor problem. Developers, bankers, architects — anyone associated with commercial real estate said, ‘That’s not our problem. You guys figure it out.’” The biggest effect of the labor shortage, Bontrager explains, is the impact on construction schedules. When there aren’t enough employees to fully staff a worksite, project timelines begin to stretch out. “Time is money. You’ve got bank loans that you’re paying interest on. The labor shortage is to the point where it’s become everyone’s issue.” According to Jordan, for Arizona to develop further, an adequate workforce is essential. “If we’re going to continue 70 | September-October 2021

Mike Bontrager

Steve Jordan

to grow like this, we need the resources, including human capital,” he says. “It’s obvious that we need a talent pipeline. Let’s start by developing the people who are in the industry, but let’s also try to forecast how we can create a pipeline that’s going to continue to feed the anticipated growth in this community.” As the steering committee chair for Build Your Future Arizona (BYFAZ), a Greater Phoenix Chamber Foundation initiative, Bontrager saw an opportunity to strengthen the organization’s partnership with NAIOP. He met with Suzanne Kinney, president and CEO of Arizona’s NAIOP chapter, and realized that the two

“Arizona’s economy is going to depend on the construction and real estate industries to keep it moving. We’re not going to be able to do it if we don’t have an adequate skilled workforce to get us there.” — Mike Bontrager organizations had a mutual interest in promoting construction careers to students. “We are fighting against a 30-year trend in which construction careers have been looked down upon,” Bontrager says. “I’ve toured training campuses, and nobody would be there. There is a branding problem, not a facility shortage.” The mission of BYFAZ is to raise awareness of high-paying construction careers and training opportunities among Arizona residents and create a sustainable pool of skilled craft workers. The BYFAZ website has a career mapping tool to show users how a construction career might advance. “If you’re a parent, you can

Jennifer Villalobos see what the salaries are, what the training is like, hear some success stories and find out what companies are doing internships or earn-to-learn programs,” Bontrager notes. Junior Achievement of Arizona (JA) is another NAIOP partnership designed to address workforce needs. The organization teaches financial literacy, entrepreneurship and career readiness to K-12 students across the state. Junior Achievement also operates BizTown, a mock city where learners spend a day working in a job and experiencing a taste of adult life. “We’ve developed curriculum that is specifically designed for high school students to learn about the real estate industry. Once we finalize partnerships with some institutions, NAIOP volunteers will teach the curriculum in the classroom,” says Sam Alpert, JA’s chief development officer. “The coursework will take students though all the components of getting involved in real estate. How do you build an apartment in Tempe? What kind of financing would you have? What would you charge for rent?” The unit will consist of six lessons spread across six weeks and likely be placed in a business, marketing or finance classroom. With major companies choosing Greater Phoenix to build, the state is poised to reap substantial benefits from these developments. Without deliberate investments in the future workforce, however, this growth will prematurely slow. “Arizona’s economy is going to depend on the construction and real estate industries to keep it moving. We’re not going to be able to do it if we don’t have an adequate skilled workforce to get us there,” Bontrager concludes. “At least not as fast as we want.”

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2021 AND BEYOND Commercial real estate development in Greater Phoenix continues to move forward

he emergence of the COVID-19 virus in Arizona 18 months ago dramatically transformed almost every aspect of life and work. Retail and restaurants closed their doors, some permanently, and offices emptied as staffers pivoted to at-home employment. One thing the pandemic couldn’t stop, however, was Arizona’s commercial growth. Brokers, developers and builders reported record numbers in 2020, and 2021 has shown no signs of slowing down. Leading the way is the industrial market. According to a report by Cushman & Wakefield, in the second quarter of 2021, approximately 23.5 million square feet of industrial

72 | September-October 2021

construction was underway across Metro Phoenix. Leasing activity and construction also remain strong. What does this all mean for the future? AZRE Magazine sat down with members of NAIOP Arizona and asked for their views on how the pandemic affected the Phoenix market, how the industrial and office sectors are faring, and what their predictions are for the Valley’s recovery and continued growth. AZRE: What do you think about the rapid economic recovery, and how long will it take? Darren Pitts: I think it’s a complicated issue with a number of significant forces

that will impact economic growth. Certainly, Arizona will continue to benefit from the relocation of companies that are weary of West Coast business and tax policies and seeking a friendlier place to do business. Jenna Borcherding: This recovery is unlike any in recent history with businesses and workers emerging with far less financial damage and at a more rapid pace. As a result, the shortages of goods, raw materials and labor are cropping up much sooner in the cycle. We are feeling some of these constraints in construction and development with long material lead times and increasing costs. Some sectors, such as industrial,

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CA - Chris Anderson, senior managing director, Hines

JB - Jenna Borcherding, director of development, VanTrust Real Estate

never slowed down and are surpassing pre-pandemic highs; others such as retail and office are slower to recover as the behaviors of consumers and employees continue to evolve. Mike Olsen: The V-shaped recovery that was anticipated post-pandemic is occurring. Printing 4 trillion new dollars over the past 18 months has had the desired effect, and asset prices in a number of sectors have doubled — the result of doubling the money supply. The true test will be how the markets adjust to the Fed’s tapering. From a longer-term perspective, despite the setbacks related to COVID-19, we are still experiencing the longest economic recovery in history — in year 13 perhaps. Are there still business cycles, or can asset prices rise forever? It appears to me that most asset classes are overvalued, and I don’t think that what we are experiencing

74 | September-October 2021

JM - Jeff Moloznik, senior vice president of development, RED Development

MO - Michael Olsen, chief financial officer, Globe Corporation

today is sustainable. But no one knows from where or when the next black swan will present itself. Chris Anderson: I think the recovery will be uneven for a while until the virus has more treatment options and more data is known about the various treatment’s longevity. Until then, we will have inflationary pressure because liquidity is at an all-time high and the supply chain is choppy at best. Will Strong: It’s always hard to speculate on the macro economy, but I do know that Phoenix is the darling of institutional industrial investors across the U.S. and the globe. Abundant labor for corporations, relatively affordable housing, record breaking absorption and even shrinking cap rate spread to Southern California is driving some of that. More and more new investors are calling us for help getting into the market.

DP - Darren Pitts, executive vice president, Velocity Retail Group

WS - Will Strong, executive managing director, Cushman & Wakefield

AZRE: What are the biggest opportunities that will exist in the Phoenix market over the next three to five years? JB: Opportunities surrounding advanced manufacturing will be plentiful in the coming years as companies locate to the Phoenix area to support Taiwan Semiconductor Manufacturing Company (TSMC), Intel and others, further diversifying our local economy. The ripple effect will also spur demand for industrial, office, retail and housing developments across the Valley. DP: The industrial distribution marketplace is a winner for Arizona. I think Interstate 10 and the Loop 303 will continue to be attractive alternatives for Southern California facilities. The technology and semiconductor industries bring highpaying jobs to the region. Intel leads

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the way, while TSMC’s new facility on I-17 is a game-changer. Competitors will follow. MO: The positive net migration into Phoenix will benefit everyone. We have a pro-business environment, a competitive cost of living relative to other metropolitan areas, and a climate that will continue to attract people from around the world. While economic setbacks are inevitable, Arizona is a wonderful place in which invest and, over the long term, those who do so will fare well. Focusing on income-producing investments, industrial properties and for-rent residential, specifically, will continue to benefit investors, but it’s time to be very selective given where we appear to be in the cycle. CA: We have the opportunity to build a world-class community if we can keep our tax base competitive, continue to invest in community infrastructure and be willing to redevelop areas that have fallen into neglect, for example re-using/ gentrifying infill neighborhoods. Jeff Moloznik: I think the biggest opportunities in the coming years will be in all forms of residential real estate. There will also be continued infill of mixed-use redevelopments along with creating flexible and efficient office spaces. DP: The Valley’s demographics are changing. There is an unprecedented bubble of baby boomers retiring, and Arizona is going to be a top destination for them. I predict strong suburban housing growth in Surprise, Goodyear, 76 | September-October 2021

Buckeye, Southwest Phoenix, Queen Creek and Pinal County. And I agree with Jeff that we’re going to see continued redevelopment. Look for many underutilized infill parcels to be redeveloped and for additional density to be added. WS: Harnessing our rapid rental rate growth sticks out to me, as does paying attention to possible redevelopment opportunities. And, of course, getting out in front of the record-breaking leasing we are seeing take place. AZRE: How long will expansion in the industrial market continue, and what do you think has the biggest chance of the derailing its positive trajectory? WS: It’s really hard to speculate here, but I would be mindful of supply, construction costs and interest rates. The supply seems to be outpaced by demand with record levels of absorption. We used to do backflips if we hit 5 million square feet annually. Then we did cartwheels once we hit 8 million square feet. And now we just reported 12 million halfway through the year. Construction and interest rates tend to be a function of the market and out of everyone’s control at a local level. MO: As I said earlier, the industrial sector is attractive but likely warrants some caution. West Valley cities, such Goodyear, that are proximate to California have the most attractive opportunity set for industrial development, but land prices are becoming a concern. And there are only

so many buildings we can lease to large online retailers. AZRE: How have the needs of industrial occupiers changed with the acceleration of the e-commerce trend? MO: Industrial has been the new retail for several quarters. E-commerce has definitely been the main driver, and many believe we have only scratched the surface given the room for continued growth in online sales. CA: Industrial occupiers continue to want to be closer to the end customer as well as onshore manufacturing to avoid being so dependent on foreign governments’ decision-making. E-commerce continues to improve, and the pandemic really made consumers embrace its possibilities a little faster than industry was ready. I expect that we’ll see further growth. JB: For consumers, e-commerce has set an expectation of immediate satisfaction, so as companies evaluate their footprint, they look to be as close to the consumer as possible. This drives demand for last mile facilities and infill sites. Industrial occupiers are often faced with a decision to retrofit older buildings in infill locations versus occupying new buildings that may be farther from their customer base. This will provide even more opportunity for property owners and nimble developers. WS: It’s not just about the consumer. Labor does not show up on a Google Earth map, but users care about workforce availability, wage rates, scalability, retention, union

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NAIOP activity, housing and amenities. All these attributes of labor are critical in site selection and ultimately, in my opinion, where investors want to place their capital. Our leasing partners work with some of the smartest engineers I have met who quantify these factors with sophisticated studies that all end up pointing to Phoenix as ground zero. AZRE: What has changed in industrial design to meet the needs of today’s tenants? MO: Industrial buildings have become more technical, and the cost of fixturing some of the e-commerce structures far exceeds the shell cost. Clear heights have increased over time — 36 feet to 40 feet is becoming more of a standard for pure distribution. There are a number of uses that don’t require those levels but, to maximize flexibility, it has to be considered in spec environments. Excess land for expansion and storage is also a critical consideration for long-term adaptability. JB: With demand for industrial space continuing to rise, the increasing cost and limited availability of industrial land forces us to think vertical. We are developing buildings with taller clear heights to increase cubic footage without having to increase the physical footprint. E-commerce tenants and fulfillment centers require far more docks per square foot compared with traditional retail supply chains, which also drives the need for more trailer parking.

78 | September-October 2021

AZRE: Are different industrial uses more prominent in certain submarkets? What are they? MO: Large distribution facilities are more prominent in submarkets that are logical for regional users, such as the West Valley markets that are proximate to the Long Beach port. Last mile uses are prominent for high-density infill areas for obvious reasons. Flex industrial is prominent in areas that have more manufacturing users to accommodate small vendors that want to be close to their manufacturing clients. If you’re planning to build spec, the best advice will come from the brokers in those markets who understand the needs of the users relative to what’s currently available and what’s being planned by other developers. WS: It does feel as though there is a trend in Sky Harbor and the Southeast Valley for larger users that resemble more bulk buildings, like those you would see in Southwest Phoenix. And Southwest Phoenix is seeing more and more Inland Empire-sized leases larger than 1 million square feet.

MO: The conundrum of inflation threats at the same time the 10-year treasury rate has retreated to February 2021 levels is sending a mixed message. In 2013, the market’s reaction to impending Fed tapering, known as the “Taper Tantrum,” was opposite of what’s happening today. Investors are rushing to buy treasury bonds, causing the recent rate drop. With the 10-year essentially being a proxy of where investors think the Fed will set rates over the next 10 years, the market is implying that, despite inflation threats, there is a low probability that cap rates will rise in the near term. At the same time, it’s hard to believe there is a lot of room for cap rates to drop. So, the best odds are for a relatively stable cap rate environment. WS: We have gone on record that Phoenix is a Tier 1 industrial market. The capital markets will reflect this more and more over time, with cap rates continuing to decrease. Investors will see for themselves the long-term value in Phoenix.

AZRE: Do you see industrial cap rates increasing, decreasing or remaining stable over the next year? JB: Over the past year, we have seen significant cap rate compression in the industrial sector as a flurry of investors, who previously had not invested in the sector, looked to gain exposure. I am optimistic that we will continue to see rates decrease over the next year, but perhaps not at the same level as the prior year.

AZRE: Many businesses went to alternative work schedules during the COVID-19 pandemic. What impact will this have on demand for office space over the next year or two? How have office layouts changed given the increased attention on social distancing, flex schedules and reduced density? MO: I think the hybrid work environment is likely here to stay for a lot of positions. At the same time,

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employees stacked on top of each other isn’t palatable now. While we have yet to see significant changes in office layouts, the larger national employers are formulating their plans for revised work environments. Some will require more space per head count. Others will move to hoteling to stay efficient while accommodating hybrid work schedules. Overall, it would seem that demand for office space should decline, but things tend to revert to the mean, so at some point the pandemic will be in the rearview mirror and the pure needs of the business and its culture will be what drives a company’s office space needs. JM: It seems as though this trend is going to be short-lived in our market. Given the lack of density throughout most of the Phoenix area, the extremes that other markets went through didn’t occur here. We are actually experiencing a boom in the office sector, which is the result of employers relocating to the Valley from those denser areas. AZRE: What changes have office landlords had to make to existing product to attract and retain tenants? MO: Landlords with existing office space can’t do much to modify the space their tenants are in, but there’s certainly been more attention placed on cleaner surfaces, environments and air circulation. Tenant improvement demands in our buildings with new leases negotiated and signed during the pandemic haven’t really changed. JM: Amenities are critical when it comes to attracting and retaining 80 | September-October 2021

tenants. It used to be commonplace for employers to want to control all aspects of their employees’ workday by providing meals, fitness facilities and entertainment opportunities within their own spaces. This changed rapidly in the past year, and the trend is definitely shifting toward more third-party-provided solutions by way of independent restaurants and fitness options. JB: We happened to be midway through construction on a speculative office building in Chandler when COVID-19 hit. We huddled up with our team and took advantage of where we were at in the course of construction and incorporated several improvements to the building that we believed would appeal to future tenants. An outdoor amenity area for the health and wellbeing of employees was added, as were motion-activated doors and touch-free fixtures throughout the building. These seem to be common enhancements landlords are making to existing buildings, as well. AZRE: Where do you see the office market being in six, 12 or 18 months? JB: As the hybrid work model is being implemented, and companies look to bring their workforce back to the office, we will see a reduction in the amount of sublease space available on the market. Touring activity continues to increase month over month, and we are seeing a steady uptick in deal size in the office market. I’m optimistic that it will continue to get better over the next year.

MO: While there were large blocks of office space listed for sublease, much of that was a reaction from large employers that were uncertain about the lasting effects of the pandemic. Not all of it was ever intended to be sublet, but companies had to keep their options open given the uncertainty. The office prospect activity in the more popular office markets — Scottsdale, Tempe and Chandler — is surprisingly strong. While certain back-office positions may not return to the office, it’s very difficult to foster or maintain a company culture with a remote work force. While cliché, it’s true: Humans are social creatures, and most want to work in an office rather than at home. It may take longer than six to 12 months, but the office market will fully recover in a variety of forms. JM: Monumental growth is ahead in the coming months. Both companies and individuals that never considered Phoenix found themselves here during the pandemic, and they saw the light. This is one of the most lifestyle-centric places to live and work, and now that the cat is out of the bag, the office market will continue to grow exponentially. AZRE: What office submarkets will lead growth in the next two years? MO: Scottsdale and Tempe will continue to dominate the Class A office markets, but the suburban office markets, including West Valley cities, will benefit from the impacts of COVID. Markets such as Goodyear, which exports 95% of its workforce to Central Phoenix and some of the East

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NAIOP Valley cities, will see Class A office users that want to attract high-quality diverse employees who are sick of commuting. Quality of life is driving employment decisions, and employers that understand this will move or expand into markets that, to date, have not had any supply of Class A office. CA: I agree with Michael. For the most part, suburban office markets will lead the growth as employers will want to be closer to their workforce. With employers needing to embrace some flexibility in the work week, there is still a need to have employees in the office most of the week to maintain culture and competitiveness. AZRE: How has the COVID-19 pandemic changed the retail market, and what do you think recovery will look like over the next one to two years? CA: The retail market was changing rapidly prior to the pandemic and will continue to evolve. Neighborhood retail will remain generally the same as consumers still need basic services. Big box, other than home improvement, will get redeveloped and need to densify with other uses, such as last mile industrial, housing and charter schools. Malls are the biggest challenge because of the way they were developed with anchors owning large swaths of the site and onerous CC&Rs (Declaration of Covenants, Conditions and Restrictions). It will take a lot of patience and capital to fix. MO: The pandemic devastated the brick-and-mortar retail market but, with a lot of government assistance,

82 | September-October 2021

many restaurateurs were able to hang on and re-open. There were definitely winners and losers, and that was particularly visible in the retail sectors. But overall, the tenant delinquencies have not been as bad for most retail landlords as originally projected. Subject to the unknown impact of new COVID variants, we should be back to normal within the next 18 to 24 months. Things have a tendency to revert to the mean, and I think that will be the case in this situation. JM: The change to the retail market has been tremendous and is everevolving. It’s shifting more frequently than ever before. Currently, we are seeing retail sales eclipse pre-pandemic levels, which wasn’t necessarily anticipated. In the next two years, we can expect retail to continue to flourish. DP: For many retailers, the pandemic accelerated changes in operating models, store design, online ordering and product distribution. Some retailers right-sized their fleets, while some closed their operations. Some expanded. Overall, the retail industry was extremely affected by COVID both positively and negatively. On the positive side, retailers proved to be very innovative and quick to adjust to the rapidly changing social distancing rules. An example is restaurants. Whether they are fast casual, fast food or sit-down, they were suddenly forced to service customers in their vehicles. Drive-thrus were packed, and parking lots were converted to waiting areas as store personnel delivered food to customers’

cars. From a technology standpoint, nearly every major brand modified, simplified or created online apps for customers. The result is that consumers now have many options to get what they want, when they want and where they want it. Overall, brick-and-mortar retail is alive and well, and we have confirmed that the experience of shopping in a store is not going away. AZRE: What categories of retail tenants expanded during the pandemic, and what do you see for the next two years? DP: In 2020, retailers in Greater Phoenix added nine grocery stores, 50 free-standing restaurants and 14 automotive buildings. Some of the larger additions include the Costco in Surprise, two Fry’s Marketplace stores and one Safeway in the East Valley, Lifetime Athletic at the Biltmore, Sprouts in Laveen and four Aldi locations throughout the Valley. For the future, we will see more free-standing retail buildings with personal services and restaurants. The categories of home improvement, home decor and remodeling, and furniture are all experiencing gains in sales. The development of sizeable shopping centers has largely curtailed, except for two areas: In Surprise, along the Loop 303 corridor near the Costco, a large power center is planned with other land parcels also attracting new retail development. Queen Creek will also be expanding with a Costco and accompanying retailers planned at Queen Creek Road and Ellsworth Road.

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NAIOP member projects

rom a 6,500-square-foot restaurant and retail addition that will enhance the already popular Park Central development in Central Phoenix to multimillionsquare-foot industrial parks along the Loop 303, commercial real estate showed no signs of slowing down during the pandemic. In fact, NAIOP Arizona members were busier than ever delivering an abundance of high-tech, high-style product to the market — with many more showstopping buildings under construction or renovation. The following pages showcase 32 projects, small and large, that NAIOP members are producing throughout Arizona.

10 WEST COMMERCE PARK

DEVELOPER: Creation GENERAL CONTRACTOR: LGE Design Build ARCHITECT: LGE Design Group LOCATION: Lower Buckeye and Miller roads,

Buckeye SIZE: 958,382 SF

84 | September-October 2021

VALUE: $37.4 million START/COMPLETION: Q1/2021-Q2/2022 SUBCONTRACTORS: Suntec Concrete, Stoll

Masonry, Rikoshea Contracting, Specialty Roofing, Valley Exterior Painting PROJECT DESCRIPTION: This best-in-class industrial product meets the market’s

demand for functional, flexible cross-dock distribution solutions. Careful consideration was given to circulation, maneuverability and building design, with special attention paid to critical features, such as clear height, loading configuration and enhanced parking/ yard availability.

2625 AT CHANDLER FREEWAY CROSSING

SUBCONTRACTORS: Ace Acoustics, Adobe

DEVELOPER: Mark IV Capital GENERAL CONTRACTOR: Venn Construction ARCHITECT: Balmer Architectural Group LOCATION: 2625 W. Geronimo Place, Chandler SIZE: 159,030 SF BROKERAGE FIRM: JLL VALUE: $34 million START/COMPLETION: 1/2018-3/2021

Drywall and Paint, Arcadia Glass Company, Beach Products, Bernie’s Brass, CDS Framing, Contemporary Flooring, Den-Mark, Desert Services, Desert Sky Surfaces, Diversified Interiors, Gen3, Hawkeye, Hersey, Aerni & Associates, Intertwine, J&M Glass, JD Sun, Kone, LaForce, Magnum Steel, McKeon, Mister Bugman, Nickle Contracting, Noding

4141 SCOTTSDALE

SUBCONTRACTORS: Caruso Turley Scott,

DEVELOPER: Mass Equities ARCHITECT: Krause LOCATION: 4141 N. Scottsdale Road, Scottsdale SIZE: 160,000 SF BROKERAGE FIRM: Cushman & Wakefield VALUE: $17 million START/COMPLETION: Q1/2021-Q1/2023

MP+E, Greey|Pickett, Larson Design Group PROJECT DESCRIPTION: Looking toward the future with a modern design, this project will provide a new anchor to the city where it pursues the region’s passion for place, nature, history, craft and the future — five attitudes essential to the design’s core. This

Doors, One Way Final Cleaning, RCI Systems, Re-Create, Rite-Way, Ryan Mechanical, Special Electronics Systems, Southwest, Suntec Concrete, Westar, Won-Door. PROJECT DESCRIPTION: This three-story Class A office features 50,790-square-foot floor plates, high 14-foot ceilings and a collaborative 10,000-square-foot VIP roof deck for private tenant use.

renovation will replace the existing brick facade with new contemporary glazing. A grand three-story atrium volume for the main entrance will unite the two separate buildings. The interiors will also be upgraded, with new signage and wayfinding throughout. The final product will add 15,426 square feet of new leasable area. 85

NAIOP 999 PLAYA DEL NORTE

DEVELOPER: Irgens Partners GENERAL CONTRACTOR: A.R. Mays ARCHITECT: WORKSBUREAU LOCATION: 999 Playa del Norte, Tempe SIZE: 94,311 SF BROKERAGE FIRM: Lee & Associates START/COMPLETION: 02/2020-04/2021 PROJECT DESCRIPTION: Playa, which sits on 2.32 acres

of land next to Tempe Town Lake, is Tempe’s newest technology-centric, high-profile Class A office building. The six-story structure, which comprises a lobby level, two stories of structured parking and three floors of office with impressive visibility, is ideally positioned at the gateway to ASU’s main campus with a full-diamond freeway interchange at Scottsdale Road and Loop 202.

AIRPARK LOGISTICS CENTER

DEVELOPER: Creation GENERAL CONTRACTOR: LGE Design Build ARCHITECT: LGE Design Group LOCATION: Bullard Avenue and Yuma Road SIZE: 2,741,336 SF

AIRPORT 48

DEVELOPER: ViaWest Group GENERAL CONTRACTOR: Stevens-Leinweber ARCHITECT: McCall & Associates LOCATION: 3232 S. 48th St., Phoenix SIZE: 146,526 SF BROKERAGE FIRM: NAI Horizon START/COMPLETION: 10/2021-Q3/2022 PROJECT DESCRIPTION: This Class A

multitentant industrial building will sit on a rectangular-shaped 9.98-acre parcel located south of Sky Harbor Airport. The property is within a Federal Qualifed Opportunity Zone and is extremely well-situated with visibility and access to State Route 143.

86 | September-October 2021

VALUE: $155 million START/COMPLETION: Q4/2021-Q2/2025 SUBCONTRACTORS: Suntec Concrete, Triad

Steel, Desert Structures, New Millenium, Phoenix Commercial Electric PROJECT DESCRIPTION: Airpark Logistics

Center, located in a federally approved Foreign Trade Zone, will consist of 2.7 million square feet of industrial space upon full build out, meeting the market’s demand for both cross-dock and rear-load product. Constructed in two phases, with special attention paid to clear height, loading configuration and enhanced parking/yard availability.

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ALLRED PARK PLACE BUILDINGS 7 & 8

DEVELOPER: Douglas Allred Company GENERAL CONTRACTOR: Willmeng Construction ARCHITECT: Balmer Architects LOCATION: 1375/1475 S. Price Rd., Chandler SIZE: 300,000 SF BROKERAGE FIRM: Cushman & Wakefield

VALUE: $110 million START/COMPLETION: 5/2020-9/2021 SUBCONTRACTORS: Bowman Engineering,

Coreslab, Hardrock Concrete, Hawkeye Electric, Apache Pipelines, Milam Glass, Pioneer Roofing PROJECT DESCRIPTION: The sister 150,000-square-foot office buildings, each

with +-50,000 square-foot floor plates, feature dramatic three-story skylit lobby atriums with contemporary finishes and sculptural staircases, as well as open workspaces with high ceilings and an abundance of natural lighting. A shared outdoor space between the two buildings includes a covered patio and barista coffee bar, a sunken patio and scattered benches for employee enjoyment, and artificial turf areas ideal for lawn games.

BUCKEYE85

DEVELOPER: Lincoln Property Company GENERAL CONTRACTOR: Layton Construction ARCHITECT: Butler Design Group LOCATION: SW corner of 103rd Avenue and Buckeye Road,

Buckeye SIZE: 321,873 SF BROKERAGE FIRM: Lincoln Property Company VALUE: $65 million START/COMPLETION: 4/2021-12/2021 SUBCONTRACTORS: AME, Hardrock, Desert Structures PROJECT DESCRIPTION: Midsize industrial users will enjoy

amenities often found only in the largest industrial projects, including a 36-foot clear height, full concrete truck courts, a 94-door cross-dock configuration and state-of-the-art freezer/ cooler capabilities, as well as touchless technology throughout, generous use of clerestory windows and an employee-centric outdoor amenity space. The Class A location supports omichannel users, successfully positioning them near clusters of suppliers, manufacturers and warehouses.

CENTRAL LOGISTICS CENTER

DEVELOPER: ViaWest Group GENERAL CONTRACTOR: Nitti Builders ARCHITECT: Deutsch Architecture Group LOCATION: 111 E. Buckeye Road, Phoenix SIZE: 439,000 SF BROKERAGE FIRM: CBRE START/COMPLETION: Q1/2021-Q4/2021 PROJECT DESCRIPTION: The project

includes more than 12-acres of vacant, developable land; a fully leased 30-foot clear height, 196,672-square-foot crossdock warehouse; and a 76,301-squarefoot freezer storage facility that underwent a floor-to-ceiling renovation, 88 | September-October 2021

including an upgraded state-of-the-art freon system. New construction consists of a 32-foot clear height, 94,146-square-foot Class A

industrial building, and a 71,555-square-foot industrial warehouse adjacent to the coldstorage facility.

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NAIOP CHANDLER CORPORATE CENTER, PHASE II DEVELOPER: VanTrust Real Estate GENERAL CONTRACTOR: Stevens-Leinweber ARCHITECT: Butler Design Group LOCATION: 4100 W. Chandler Blvd., Chandler SIZE: 118,000 SF BROKERAGE FIRM: JLL START/COMPLETION: 1/2020-1/2021 SUBCONTRACTORS: Stone Cold Masonry, Spectrum

Mechanical, Aero Automatic Fire Protection, Bell Steel, Progressive Roofing, Riggs Contracting, ABCO West Electrical PROJECT DESCRIPTION: Chandler Corporate Center is a 26-acre office and retail development positioned just 1 mile west of the Loop 101. Phase 1 included a specbuilt 118,000-square-foot office building that was leased to Allstate. Phase 2 is a spec-built “sister” building. Future phases will include retail and additional office.

CHANDLER CROSSROADS

DEVELOPER: ViaWest Group GENERAL CONTRACTOR: Willmeng Construction ARCHITECT: Deutsch Architecture Group LOCATION: 2800 S. Gilbert Road, Chandler SIZE: 116,083 SF

CONVERGE LOGISTICS CENTER

DEVELOPER: ViaWest Group GENERAL CONTRACTOR: Willmeng Construction ARCHITECT: Butler Design Group LOCATION: Interstate 10 and Chandler

Boulevard 90 | September-October 2021

BROKERAGE FIRM: Lee & Associates START/COMPLETION: 10/2021-Q3/2022 PROJECT DESCRIPTION: This new building,

with a fenced truck court that is screened from the road, will feature a 30-foot clear height, clerestory windows and outdoor common

SIZE: 510,832 SF BROKERAGE FIRM: Cushman & Wakefield START/COMPLETION: Q3/2021-Q2/2022 PROJECT DESCRIPTION: ViaWest Group has

a 77-year ground lease with Kyrene School District on 28.6 acres on which it will develop

area patio space. The front elevation has been dressed up to echo the appearance of an adjacent office product. The initial build-out will include one 2,396-square-foot spec suite of office, but the structure is divisible from 29,000 square feet to 116,000 square feet.

the Converge Logistics Center. The project will consist of three general industrial buildings with interstate visibility. The multitenant buildings feature divisibility to 23,500, 39,800 and 52,000 square feet; 32-foot clear heights; and a combination of dock-high and grade-level doors.

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Our company recently completed two separate remodeling projects under the direction of Agate. Knowing Lou Primak and Rick Nichols for 40-plus years, I knew that our projects were in capable hands. A major remodel of our BMW Certified Pre-Owned facility was met with several unforeseen challenges due to the age of the building. Lou and his team communicated consistently and were in contact every step of the way to ensure that we remained up to speed to meet our goals for completion and final walk through.

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”

Lou and Rick run a great set of companies and are always available if the need arises to call them. They follow up after the project is completed to see if there are any issues that have risen and if there are, they always address them immediately and make sure you “the Customer” is 100 percent satisfied with the results. Use them with confidence, I know I sure do! -Jay Donkersloot, Phoenix Pavers

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2403 N. Country Club Drive | Scottsdale, Arizona 85256 | 480.994.9455 AZ License: ROC89261,A & ROC73578,B-1

NAIOP DOORDASH

DEVELOPER: Lincoln Property Company GENERAL CONTRACTOR: Holder Construction ARCHITECT: McCarthy Nordburg LOCATION: 1033 W. Roosevelt Way, Tempe SIZE: 197,500 SF (Phases 1-2) BROKERAGE FIRM: Cushman & Wakefield VALUE: $17,775,000 START/COMPLETION: 7/2019-6/2021 (Phases 1-2) SUBCONTRACTORS : Energy Systems Design, AZ

Restaurant Supply, Airpark Signs PROJECT DESCRIPTION: The main objective was

to design a dynamic new office that supports the organizational needs of DoorDash and represents its brand and culture. The Grand 2 provided the ideal location, and DoorDash will occupy the entire ninestory building. Broken into sales and support floors,

GATORADE/PEPSI DISTRIBUTION

DEVELOPER: Merit Partners GENERAL CONTRACTOR: Stevens-Leinweber ARCHITECT: Butler Design Group LOCATION: NCW 75th Avenue and Buckeye

Road, Tolleson

the office includes a reception on the first floor, a variety of collaboration and meeting spaces, a technology bar, training rooms and two large break rooms that support

SIZE: 750,000 SF BROKERAGE FIRM: CBRE START/COMPLETION: 3/2021-2/2022 SUBCONTRACTORS: Suntec Concrete, Integrity

Electric, Pro-Low PROJECT DESCRIPTION: The new warehouse

catered food. Polished concrete floors, exposed concrete columns and wood ceiling details reinforce the company’s focus on natural materials.

and distribution center will more than double the beverage company’s Metro Phoenix industrial footprint. Building features include 40-foot clear heights, cross-dock loading and generous power. The project is 1.5 miles from I-10 and served by a full-diamond interchange at 75th Avenue.

GOODYEAR CROSSING INDUSTRIAL PARK

DEVELOPER: ViaWest Group GENERAL CONTRACTOR: Willmeng

Construction ARCHITECT: McCall & Associates LOCATION: 165520 W. Commerce

Drive, Goodyear SIZE: 411,026 SF BROKERAGE FIRM: Lee & Associates VALUE: $20.9 million START/COMPLETION: 2/2021-

9/2021 SUBCONTRACTORS: Hawkins Design

Group, Mechanical Designs, Riggs Companies, Bell Steel, Panelized Roof Structures, Global Roofing, Summit Fire Protection, AE Concrete, ELS Landscaping 92 | September-October 2021

PROJECT DESCRIPTION: This project, located in

a Qualified Federal Opportunity Zone, comprises three buildings designed for office, warehouse and light industrial uses. Each is constructed with concrete tilt-up walls, storefront glazing, and metal

trellises with flat, wood panelized roofing systems. The largest building, at 284,107 square feet, will feature a 36-foot clear height cross-dock design, while the smaller two will be front-loaded with 28-foot clear heights.

PROUD TO ANNOUNCE OUR EXPANSION TO ARIZONA

FCL Builders is pleased to announce that we have expanded FCL’s footprint in the Southwest with our office in Phoenix, bringing the same commitment to service we deliver throughout the country to the Arizona market. Kelly Pettigrew

Jeff Dalton

(480) 825-6683

(480) 652-3899

CONTACT OUR LOCAL TEAM

97%

KENOSHA CAMPBELL

IRVINE

CHICAGO

PHOENIX

PHILADELPHIA

BALTIMORE

CUSTOMER RETENTION RATE

DISTRIBUTION WAREHOUSES

ATLANTA

DALLAS/FT. WORTH HOUSTON

S I N C E 19 7 6 | F C L B U I L D E R S . C O M

HACI Mechanical Contractors, Inc. 2108 West Shangri La Rd., Phoenix, AZ 85029 602.944.1555 | hacimechanical.com

NAIOP

GSQ GOODYEAR

SIZE: 228,629 SF BROKERAGE FIRM: CBRE VALUE: $125 million START/COMPLETION: 4/2021-6/2022 PROJECT DESCRIPTION: GSQ introduces a

Square, Goodyear

modern, forward-thinking city hall destination

KEHE DISTRIBUTORS BUILD-TO-SUIT

START/COMPLETION: 10/2020-9/2021 SUBCONTRACTORS: AAA Landscape, ABS

DEVELOPER: Globe Corporation GENERAL CONTRACTOR: Ryan Companies ARCHITECT: Butler Design Group LOCATION: 15150 W. Park Place & 1860 N. Civic

DEVELOPER: Becknell Industrial GENERAL CONTRACTOR: Becknell Industrial ARCHITECT: Ware Malcomb LOCATION: 17510 W. Thomas Road, Goodyear SIZE: 468,182 SF BROKERAGE FIRM: Colliers International VALUE: $68 million 94 | September-October 2021

Floor Covering, ALTA Refrigeration, D.H. Pace, Delta Diversified Enterprises, Diamond Painting, FE Moran, FREEZ Construction, HACI Mechanical Contractors, Indiana Steel Fabricating, Integrated Masonry, Lazzaro Companies, Performance Contracting Inc., Precision Glass & Aluminum, Roofing

designed to grow with Goodyear. The project features a two-acre civic park surrounded by Class A office building Gen1, a four-level parking structure, library and Goodyear’s city hall.

Southwest, Scott’s Diversified Construction, Suntec Concrete, Systems LLC, Western Fence, Western Underground PROJECT DESCRIPTION: Specialty food provider KeHE Distributors is growing its national footprint into the greater Phoenix market. This state-ofthe-art tri-temp facility, which is expandable by 150,000 square feet, contains freezer, cooler and dry storage space.

LOTUS PROJECT PHASE II

DEVELOPER: Conor Commercial Real Estate GENERAL CONTRACTOR: McShane

Construction Company ARCHITECT: DLR Group LOCATION: 6575/6636/6685 W. Frye Road,

Chandler SIZE: 292,098 SF BROKERAGE FIRM: CBRE VALUE: $45 million START/COMPLETION: 1/2021-12/2021 SUBCONTRACTORS: Suntec, Structures

Group, Pueblo Mechanical & Controls, Denny Clark Masonry, RMJ Electric, Ikon Steel, Specialty Roofing, Redpoint Contracting PROJECT DESCRIPTION: This centrally located

Class A industrial project with prominent Loop 202 freeway frontage consists of three highly visible industrial building designed for manufacturing, research and development, and technology-centric users. Buildings 5 (144,321 square feet) and 6

(106,875 square feet) will feature 32-foot clear heights, while building 7 (48,786 square feet) offers a 28-foot clear height. All will include dock-high and grade-level doors, ample parking and elevated design elements.

MESA HANGARS AT FALCON FIELD PHASE 1

DEVELOPER: Davcon Companies/Mesa Hangar/Davcon Aviation GENERAL CONTRACTOR: GCON Inc. ARCHITECT: ADM Group LOCATION: 2559 N. Greenfield Road, Mesa SIZE: 400,000 SF BROKERAGE FIRM: Leading Edge Real Estate VALUE: $56 million START/COMPLETION: 5/2020-7/2021 SUBCONTRACTORS: Arizona Corporate Builders, Riggs Concrete, RMJ,

Wall Assemblies, Aspen Interiors, Pueblo Mechanical, Iron Horse, Markham, Carters, Aero, Amber Steel, Arizona Glass and Glazing, Envision, Otis, Recreate, Progressive Roofing, Premier Underground, Reiber, Integra Engineering, Sportsmans Concrete PROJECT DESCRIPTION: This new aviation development in an Opportunity Zone consists of office space mixed-use hangars that can accommodate various aircraft types, including large business jets and helicopters. Proposed uses for the S-1 occupancy hangars include FBO

operations, corporate aircraft storage, helicopter operations, aircraft maintenance, light aviation manufacturing and assembly, and aerospace industry.

NEW SQUARE CHANDLER

DEVELOPER: Spike Lawrence Ventures/HCW GENERAL CONTRACTOR: Layton

Construction/Crossland (Hilton Garden Inn) ARCHITECT: Whitneybell Perry LOCATION: 130/150/180 S. Arizona Ave.,

Chandler SIZE: 129,000 SF BROKERAGE FIRM: Cushman & Wakefield VALUE: $36 million START/COMPLETION: 11/2019-12/2020 SUBCONTRACTORS: Progressive Roofing,

ResComm Plumbing, BTS Heating and Air, Clayton Flooring, Integrity Electric, Aspen Technology, Precision Glass, European Pavers, Concrete Finishing Professionals, Sigler Controls, Schindler Elevators PROJECT DESCRIPTION: This multiuse commercial/Class A office development in historic downtown Chandler brings an

impressive list of popular eateries, including DC Steak House, The Stillery and JINYA Ramen Bar, and such notable companies as Great Western Bank and WellSky to the area. The center courtyard stage is

equipped with lighting and state-of-the-art sound for concerts and events. The project also includes a 111room Hilton Garden Inn, and Phase 2 will add luxury multifamily residential. 95

NAIOP ORTHO AZ

GENERAL CONTRACTOR: LGE Design Build ARCHITECT: LGE Design Group LOCATION: 8405 N. Pima Center Parkway,

Scottsdale SIZE: 50,000 SF VALUE: $14.3 million START/COMPLETION: Q1/2020-Q1/2021 SUBCONTRACTORS: Rosendin Electric, Re-Create

Masonry, Ace Asphalt, Arc Steel, Milam Glass PROJECT DESCRIPTION: The two-story

workspace is the largest medical office building in the area. It features a surgery center and onsite imaging services. The design is focused on improving efficiency and providing doctors and patients with a convenient and comfortable experience. The contemporary building showcases glass and concrete elements, allowing for plenty of natural light.

PARK CENTRAL RETAIL AND RESTAURANTS

DEVELOPER: Plaza Companies ARCHITECT: Butler Design Group LOCATION: 3112 N. Central Ave., Phoenix SIZE: 6,500 SF BROKERAGE FIRM: Plaza Companies/Cushman

& Wakefield VALUE: $3.2 million START/COMPLETION: Q4/2021-Q2/2022 PROJECT DESCRIPTION: The new restaurant and

retail buildings will be home to three significant hospitality tenants: Poolboy, a concept to be named later, and a relocated Starbucks with drive-thru access. A midcentury modern design complements the overall aesthetic of the revitalized Park Central development.

PARK LUCERO EAST

DEVELOPER: Artis REIT GENERAL CONTRACTOR: Willmeng Construction ARCHITECT: Butler Design Group LOCATION: 410/430/450 E. Germann Road, Gilbert SIZE: 562,920 SF BROKERAGE FIRM: JLL VALUE: $60 million START/COMPLETION: Q1/2021-Q2/2022 SUBCONTRACTORS: Kearney Electric, Summit Fire

Protection, Universal Piping, Riggs Concrete, Atlas Masonry, Progressive Roofing, Pro-Low Joint Venture PROJECT DESCRIPTION: This Class A industrial development consists of three buildings along the south Loop 202 with 202 and Germann Road frontage. A joint venture partnership between Artis REIT and Nuveen Real Estate, it is located adjacent to Park Lucero, a multiphase industrial complex. 96 | September-October 2021

BEMO

CARVANA

PARK 303

MET 202

Butler Design Group Architects & Planners

www.butlerdesigngroup.com

CHANDLER CORPORATE CENTER

RRB MANUFACTURING

NAIOP ARCHITECT OF THE YEAR

“ LIC#A ROC108937 | B-01 ROC108085

NAIOP PARK303 PHASE II

DEVELOPER: Lincoln Property Company GENERAL CONTRACTOR: Willmeng Construction ARCHITECT: Butler Design Group LOCATION: Directly fronting the east side of

Loop 303, with buildings spanning the north and south sides of Glendale Avenue SIZE: 2.2 million SF BROKERAGE FIRM: Lincoln Property Company VALUE: $400 million START/COMPLETION: 9/2021-11/2022 PROJECT DESCRIPTION: Phase II adds four new state-of-the-art industrial buildings to the 210acre Park303 industrial park. In addition to Class A building features, Phase II includes a health- and wellness-focused outdoor space with experience. Building amenities include a 40-foot sports courts, game areas and shaded dining clear height, steel moment frame shear bracing, and barbeque stations for a best-in-class tenant oversized clerestory windows on all elevations,

generous power, ESFR sprinklers, 25-foot-tall glass entries and touchless technology throughout. The site is Foreign Trade Zone capable.

PLC TWO

DEVELOPER: Merit Partners GENERAL CONTRACTOR: Stevens-Leinweber ARCHITECT: Ware Malcomb LOCATION: 1515 S. 91st Ave., Phoenix SIZE: 481,600 SF BROKERAGE FIRM: JLL START/COMPLETION: 12/2020-10/2021 SUBCONTRACTORS: RMJ Electrical, Riggs

Companies, Panelized Structures PROJECT DESCRIPTION: The fully speculative PLC Two is designed for major manufacturing use. Amenities include a 40-foot clear height and generous dock doors, and auto and trailer parking, with all of the efficiencies needed to operate a state-of-the-art warehouse, distribution or manufacturing operation. The

building is less than 3 miles from a full-diamond I-10 interchange, less than 30 minutes from Sky

Harbor Airport and within a 30-minute drive to 1.9+ million residents.

(TALKING STICK RESORT ARENA RENOVATIONS) DEVELOPER: Phoenix Arena Development Limited Partnership GENERAL CONTRACTOR: Okland Construction ARCHITECT: Hellmuth, Obata & Kassabaum (HOK) LOCATION: 201 E. Jefferson St., Phoenix SIZE: 15,000 SF VALUE: $10 million START/COMPLETION: 8/2019-8/2021 SUBCONTRACTORS: Comfort Systems USA Southwest, Climatec, Preferred, Able Balance PROJECT DESCRIPTION: The Talking Stick Arena renovations enhance the fan experience by creating a modern, open environment with areas upgrades, such as HVAC, keep guest comfort in that will be used to socialize and enjoy the game mind. The heart of the arena cooling system was overhauled, including installation of three 1,200experience. Behind-the-scenes infrastructure

ton Carrier Chillers to maximize efficiency and allow the arena to cut-over to a self-sustaining cooling system.

PROJECT 201: PHX REIMAGINED

98 | September-October 2021

DEVELOPMENT CONSTRUCTION ARCHITECTURE + ENGINEERING REAL ESTATE MANAGEMENT CAPITAL MARKETS

BUILD YOUR STORY WITH US. Ryan’s story was built on the foundation of integrity, honesty, and community. And a belief that we offer something nobody else can. By creating diverse, inclusive and welcoming workplaces where all team members can grow and thrive, we also create a culture where we share in each other’s successes and where we create new stories of success for our customers and communities. For our current commercial real estate career openings to see how you might build your Ryan story visit ryancompanies.com/careers

At last, a Single Marketplace for Your Warehouse Needs The Prologis Essentials Marketplace is the place to find critical solutions for your facility – racking, forklifts, LED lighting, time-saving services – with additional products and services added frequently. Quick access to oﬀerings from Prologis-trusted vendors saves you a lot of time, and you get Prologis-preferred pricing, too! Select options are also available for non-Prologis buildings.

Phoenix 2525 E. Camelback Road, Suite 400 Phoenix, Arizona 85016 Main: +1 602 474 8350 For our full list of oﬀerings, please visit www.prologisessentials.com

NAIOP SOLLID CABINETRY

GENERAL CONTRACTOR: LGE Design Build ARCHITECT: LGE Design Group LOCATION: 2615 E. Germann Road, Chandler SIZE: 251,000 SF VALUE: $25.1 million START/COMPLETION: 4/2020-8/2021 SUBCONTRACTORS: Phoenix Commercial

Electric, Hardrock Concrete, TriMega Mech Heating & AC, Sharp Creek Contracting, Jonic Glass PROJECT DESCRIPTION: This custom cabinetry office, warehouse and manufacturing facility, which is situated on 17 acres, features 50,000 square feet of Class A office space; an expansive two-story lobby with lush finishes; and manufacturing equipment imported from

around the world. Equally as impressive is the 4,600-square-foot dust control system from Germany that is enclosed in its own yard and

screened with two-story structural steel and a perforated metal skin.

space, a boutique hotel by restauranteur Sam Fox, luxury residences and unique upscale dining and retail venues. Guest and tenant perks include VIP valet service, lavish amenities and

breathtaking views of Camelback Mountain. The Grove is also home to the new state-of-the-art Phoenix Suns & Mercury training facility.

THE GROVE

DEVELOPER: RED Development GENERAL CONTRACTOR: Okland Construction ARCHITECT: Nelsen Partners LOCATION: 4300 E. Camelback Road, Phoenix SIZE: 750,000 SF BROKERAGE FIRM: JLL/RED Development VALUE: $300 million START/COMPLETION: 3/2021-Q3/2022 SUBCONTRACTORS: Suntec Concrete,

Blount, Levake, Sun Valley Masonry, Cutting Edge Fabrication, Progressive Roofing, Airpark Signs, Otis, Irontree Plumbing, Comfort Systems Southwest, JFK Electic, AME Landscape PROJECT DESCRIPTION: This creative, sophisticated mixed-use campus features 180,000+ square feet of Class AA office

TOLLESON 107 LOGISTICS CENTER

DEVELOPER: Trammell Crow Arizona Development Inc. GENERAL CONTRACTOR: Wespac Construction ARCHITECT: Butler Design Group LOCATION: 10601 W. Van Buren St., Tolleson SIZE: 332,160 SF BROKERAGE FIRM: Cushman & Wakefield VALUE: $16,204,177 START/COMPLETION: 5/2021-1/2022 SUBCONTRACTORS: DP Electric, Ryan Mechanical,

Integrated Masonry, S&S, Riggs, Progressive Roofing PROJECT DESCRIPTION: This large-scale Class A industrial project comprises logistics and retail space. The cross-dock facility will feature 36-foot clear height, concrete truck courts, four points of access, 52-by-52-foot column spacing with 60-foot speed bays, 266 car parking stalls, 54 trailer parking stalls, 78 dock-high positions, and four grade-level doors. 100 | September-October 2021

DELIVERING EXCELLENCE AND INTEGRITY FOR MORE THAN THREE DECADES.

YEARS

Over the test of time, Bjerk Builders has consistently proven their unparalleled dedication to excellence, by completing client projects on time, within budget and with the utmost level of quality. License B1-088897

Bjerk-PROVEN-7.125x4.75-HfPg.indd 1

480.497.2300 • fax: 480.497.9610 www.bjerkbuilders.com 101

9/23/20 9:08 AM

NAIOP VT 303 BUILDING 2

DEVELOPER: VanTrust Real Estate GENERAL CONTRACTOR: Layton Construction ARCHITECT: HPA Architects LOCATION: 6390 N. Alsup Avenue, Glendale SIZE: 542,974 SF BROKERAGE FIRM: Cushman & Wakefield START/COMPLETION: 4/2021-12/2021 SUBCONTRACTORS: Suntec, Gunsight, Castle

Steel, Olympic West Fire Protection, Panelized Structures, Ricor, Progressive Roofing, Tekstar, AME Electrical PROJECT DESCRIPTION: VT 303 Building 2 is a cross-dock structure with a 40-foot clear height, 409 automobile spaces, 216 trailer parking spaces and multiple points of ingress and egress by way of Sarival Road and Alsup Avenue.

VT TUCSON

DEVELOPER: VanTrust Real Estate GENERAL CONTRACTOR: Catamount Constructors ARCHITECT: HPA Architects LOCATION: 3550 E. Corona Road, Tucson SIZE: 278,670 SF BROKERAGE FIRM: Cushman & Wakefield/PICOR START/COMPLETION: 1/2021-8/2021 SUBCONTRACTORS: Markham Contracting, Central

AZ Civil Construction, Suntec Concrete, Global Roofing SW, Olympic West Fire, JAX Refrigeration, Sturgeon Electric PROJECT DESCRIPTION: This cross-dock build-tosuit, situated on 46 acres, features a 36-foot clear height, 454 automobile parking stalls and 392 trailer stalls. Constructed in fewer than eight months, it is VanTrust’s first project in Southern Arizona.

VA OUTPATIENT CENTER

DEVELOPER: Phoenix VA LLC GENERAL CONTRACTOR: Jacobsen

Construction Company ARCHITECT: Hoefer Welker LOCATION: 400 N. 32nd St., Phoenix SIZE: 281,543 SF VALUE: $95 million START/COMPLETION: Q1/2019-Q4/2021 SUBCONTRACTORS: Graef Construction,

Suntec Concrete, Cives Steel Company, TPAC, Harris, Complete Fire Protection, Rosendin Electric, Southwest Integrated Solutions, Pete King Construction, Wholesale Flooring, Stone Finish, Western Millwork, Western Acoustics, DH Pace, Gen3, Walters & Wolf, Sun Valley Masonry, Progressive Roofing, Schindler Elevator, Sunland Asphalt, Keystone Concrete, Chacon Landscaping PROJECT DESCRIPTION: This Veterans Affairs clinic will offer patients primary care, mental 102 | September-October 2021

health treatment, radiology services, OB-GYN care, pharmacy services and more, ensuring the best possible care for those who have selflessly served their country. An open office bullpen configuration will enhance collaboration and

communication in support of the VA’s PatientAligned Care Teams initiative. This facility will be one of the VA’s largest and busiest clinics, taking more than 500,000 patient visits annually in 360 exam and consult rooms.

something’s different. Our keen sense of vision and depth of knowledge create an experience which allows our developer clients to focus on securing deals with peace of mind. Experience the Difference. WILLMENG.COM | AZ ROC B-01 082904 | AZ ROC A 323741

FOR SALE OR LEASE

Reems Rd. & Olive Ave. Glendale, Arizona

BUILD TO SUIT OPPORTUNITY Q4 2022 DELIVERY FLEXIBLE BUILDING PLANS RANGE FROM 120,000 SF TO 1,000,000 SF RyanAtWoolfLogistics.Colliers.com

BRIAN GLEASON, SIOR Dir +1 602.525.3787 brian.gleason@colliers.com

BONNIE HALLEY, CCIM Dir +1 602.222.5100 bonnie.halley@colliers.com

MELISSA MARKS DANNY SCHUSTER Dir +1 602.222.5053 Dir +1 602.222.5097 melissa.marks@colliers.com danny.schuster@colliers.com

103

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Meet Your Local Banking Expert: Ericka LeMaster Senior Managing Director, Commercial Real Estate elemaster@alliancebankofarizona.com (602) 952-5452

alliancebankofarizona.com

Top 10 - Forbes Best Banks Alliance Bank of Arizona, a division of Western Alliance Bank, Member FDIC. Western Alliance ranks top ten on Forbes’ Best Banks in America list five years in a row, 2016-2020.

AZRE September/October 2021

Articles inside

NAIOP

Industrial Development

Arizona Multihousing Association

City of Tempe

Cool Offices

Stevens-Leinweber

Legislative Update

Executive Profile

Big Deals

New to Market

After Hours